Stocks stumbled on Thursday amid a rising number of coronavirus infections in many U.S. states and countries, raising fears on Wall Street about the impact on the economy's recovery. The slump also comes after the Federal Reserve's forecast on Wednesday that as many as 15 million Americansby year-end into 2021.
The Dow Jones industrial average plunged 1,862 points, or 6.9%, to 25,128. The broader S&P 500-stock index fell 5.9% and the tech-heavy Nasdaq composite slipped 5.3%.
Stocks have been rallying over the past two months at a rate that many skeptics said was unsustainable and that didn't reflect the dire condition of the American economy. The Federal Reserve warning on Wednesday that the road to recovery would be long conflicts with the Trump administration's sunnier forecast. More than 2 million Americansn the latest week, a signal that the effects of coronavirus closures linger even as the labor market improves amid business reopenings and rehirings.
"The labor market is coming back, but it is very unclear as to how long it will take to heal," said Gus Faucher, chief economist at PNC, in an email. "But if virus concerns persist and consumers are reluctant to spend, many businesses will close permanently, forcing workers to find new jobs and slowing the labor market recovery."
In the U.S., Texas and Florida were among the states reporting jumps in the number of coronavirus cases after precautions were relaxed last month. The total number of U.S. cases has surpassed 2 million and the country's official tally of deaths from COVID-19 exceeds 111,000.
Globally, India reported a record number of nearly 10,000 new coronavirus cases over the past 24 hours, with health services in the worst-hit cities of Mumbai, New Delhi and Chennai becoming swamped by the rising infections. In South Korea, the latest 45 new cases came in a weeks-long resurgence that health authorities said they fear might develop into a massive second wave of infections and hospitalizations.
Such developments have raised alarm on Wall Street, according to markets analyst Stephen Innes of AxiCorp. "After all, a secondary outbreak is nothing to sneeze at as traders remain in a state of risk limbo watching risk assets for signs of continuation or stall," Innes said in a commentary.
The outlook for a recovery from the steepest economic slump in decades is uncertain as states and countries push ahead with reopenings from pandemic shutdowns.
Brazil, Mexico, South Africa, India and Pakistan are among countries easing tight restrictions before their first outbreaks have peaked and before establishing detailed surveillance and testing systems to keep the virus under control. Health experts have warned that could ultimately have devastating consequences.
In the U.S., seventeen states have reported an increase in average daily new COVID-19 cases compared with two weeks ago, including Florida, California and Texas. The number of confirmed coronavirus cases in the United States topped 2 million late Wednesday night, according to Johns Hopkins University.