Stocks fell sharply Thursday on Wall Street as coronavirus cases in the U.S. increased again, deflating recent optimism that the economy could recover quickly from its worst crisis in decades and raising doubts about whether the market’s scorching comeback can last.
The Dow Jones Industrial Average sank more than 1,800 points and the S&P 500 dropped 5.9%, its worst day since mid-March, when stocks had a number of harrowing falls as the virus lockdowns began.
Many market watchers have been saying that the comeback in the market since late March was overdone and did not reflect the dire state of the economy. The S&P 500 rallied 44.5% between late March and Monday, erasing most of its losses tied to the pandemic.
The selling comes as coronavirus cases rise in the U.S., with some of the increase likely tied to the reopening of businesses and the lifting of stay-at-home orders. Cases are climbing in nearly half the states, according to an Associated Press analysis, a worrying trend that could intensify as people return to work and venture out during the summer.
“Not surprisingly, a lack of preventative behavior has led to a resurgence in COVID-19 cases around the country, and the stock market is having another gut check,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
Investor optimism for a speedy recovery in the economy was also dimmed by the Federal Reserve, which warned Wednesday that the road to recovery from the worst downturn in decades would be long and vowed to keep rates low for the foreseeable future.
Those factors, along with the recent run-up in stock prices, set the stage for the wave of selling Thursday.