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Stocks slide on rising investor concerns about spreading coronavirus

26 states see rise in daily COVID-19 cases
26 states see rise in daily COVID-19 cases 02:06

Stocks slid Wednesday as new coronavirus cases in the U.S. climbed to the highest level in two months, dimming investors' hopes for a relatively quick economic turnaround.

The Dow fell 710 points, or 2.7%, to close at 25,446, and has given back all of its gains for the month. The blue-chip index is down nearly 11% on the year. The broader S&P 500 and tech-heavy Nasdaq also both lost more than 2% on the day. 

The selling, which followed a skid in European stock indexes, accelerated on news that New York, New Jersey and Connecticut will require visitors from states with high infection rates to quarantine for 14 days.

"The market has been optimistic that the economy is re-opening and that life would get somewhat back to normal, but the virus may have other ideas and unfortunately increased interactions between people – which is critical for the economy to regain its former luster – leads to increased infections," said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

While economic data is pointing to a recovery from the spring lockdowns that are being eased in the U.S. and other countries, the rise in new infections is stoking worries that the reopening of businesses may have to be curtailed again.

"We've created this optimistic trade over the last few weeks," said J.J. Kinahan, chief strategist with TD Ameritrade. "Are we going to be able to get back to business as fast as it has been priced into equities?"

Trump speaks at rally amid COVID-19 warnings 02:46

The market has been mostly in rally mode since April as investors focused on the prospects for an economic turnaround as broad areas of the economy reopened. Recently, some encouraging economic reports have fueled optimism that the reopening of businesses in the U.S. and elsewhere could pull the economy out of a deep recession sooner rather than later.

But the recent surge in new infections is undercutting some of that optimism. Coronavirus hospitalizations and caseloads have hit new highs in over a half-dozen U.S. states. New cases nationwide are back near their peak level of two months ago.

While early hot spots like New York and New Jersey have seen cases steadily decrease, the virus has been hitting the south and west. Several states on Tuesday set single-day records, including Arizona, California, Mississippi, Nevada and Texas.

On Tuesday, Federal health officials told Congress to brace for a second wave of coronavirus infections in the fall and winter of this year.

"There's the possibility of shutdowns, but probably more realistically delays in reopening," Kinahan said. "This puts doubt on how comfortable people will be getting on a plane or staying in hotels."

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