MANHATTAN (CN) — The days of wild 1,000-point swings on Wall Street may be over, but the market is still flip-flopping between good and bad days as cases of Covid-19 climb steeply.
The Dow Jones Industrial Average, coming off mild gains on Tuesday, fell 233 points at the morning bell on Wednesday, about a 0.9% decrease. The S&P 500 and Nasdaq both had slightly lesser declines.
The drop was exacerbated by a report by the International Monetary Fund, which projects that global growth will shrink this year by -4.9%, about 2% lower than a similar IMF forecast in April.
“We are now projecting a deeper recession in 2020, and a slower recovery in 2021,” IMF Chief Economist Gita Gopinath said during a Wednesday morning press conference. The IMF forecast global growth at 5.4% in 2021, about 6.5% less than pre-coronavirus forecasts for that year. “This crisis is a crisis like no other and will have a recovery like no other,” Gopinath said.
The shape of the economic recovery remains uncertain, though, since a vaccine could help speed the recovery, and a second wave of the virus could diminish it, Gopinath said.
“This is indeed the worst recession since the Great Depression,” she said. “No country has been spared.”
Investors also have become nervous by the growing number of coronavirus cases. To date, more than 9.2 million people have been infected by Covid-19 worldwide, while nearly 478,000 have died, according to data compiled by Johns Hopkins University. In the United States, 2.3 million people have contracted Covid-19, while more than 121,000 have died.
Cases have spiked in a number of states, most notably Arizona, Texas and Georgia, which had reopened their economies earlier than many other states. After the largest daily increase on Monday, World Health Organization Director Tedros Adhanom Ghebreyesus said that “politicization of the pandemic has exacerbated it.”
Politics have also played a part in testing. During a speech over the weekend, President Trump said increased testing had led to the growing numbers. Ignoring the fact that hospitalizations are up to the point that many medical centers are running out of beds, Trump said fewer tests would deflate the numbers.
“When you do testing to that extent, you’re going to find more people, you’re going to find more cases,” he said. “So I said to my people, ‘Slow the testing down, please.’”
White House officials were quick to explain the remarks as a joke aimed at the media, but Trump later said, “I don’t kid,” when asked if that were true. “By having more tests, we find more cases,” the president said on Tuesday.
The top health official on the pandemic has assured lawmakers testing has not been ramped down for political reasons. During testimony before the House Committee on Energy and Commerce, Dr. Anthony Fauci said that “none of us have ever been told to slow down testing.”
But the U.S. government reportedly will pull back funding for Covid-19 tests in five states, including those with hard-hit metropolitan areas like Houston. The funding expires on June 30, and no extensions have been filed.
Democrats have criticized the president for his comments, as well as the fact that he has $14 billion appropriated for coronavirus testing that he hasn’t yet used. “The United States is at a critical juncture in its fight against Covid-19, and now is the time for an aggressive and fast response,” Senators Chuck Schumer and Patty Murray wrote in a Sunday letter to U.S. Health and Human Services Secretary Alex Azar.
Some Republicans also are calling for additional tests. Senate Majority Whip John Thune said the country needs “millions of them, tens of millions of them, especially when we start opening up this fall.” Thune is a South Dakota Republican.
Economists and investors also are keeping a wary eye on trade tensions. Gopinath said that global trade tensions are projected to collapse by 12% and could further hinder a world economic recovery.
Markets fell early Tuesday after a Trump administration official said the U.S.-China trade deal was dead, but now the U.S. trade relationship with Europe also may be deteriorating.
The U.S. Trade Representative is now considering $3.1 billion in tariffs on products from France, Germany, Spain and the United Kingdom. Tariffs on aluminum from Canada also is being discussed, much to the chagrin of business groups like the U.S. Chamber of Commerce.
“Bringing back these tariffs would be like a bad horror movie,” said Neil Herrington, a senior vice president at the chamber in a statement. “Most of the U.S. aluminum sector opposes them, and they’ll hurt American manufacturers who use aluminum as an input.”
European markets all pointed down on Wednesday. By 8 a.m. EST, the pan-European Stoxx 600 was down 1.5%, while individual markets in Germany, England and France were doing even worse.
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