TOPLINE The stock market finished lower on Tuesday, cutting a five-day winning streak, as investors worry that surging coronavirus cases across the country could derail an economic recovery.
KEY FACTS
The Dow Jones Industrial Average was down 1.5%, nearly 400 points, on Tuesday, while the S&P 500 fell 1.1% and the tech-heavy Nasdaq Composite lost 0.9%.
Shares of companies that would benefit from a reopening of the economy—including airlines, cruise stocks and some retailers—moved lower as many states continue to see a spike in new coronavirus infections.
Stocks traded briefly off their lows on news that the U.S. government awarded biotech drugmaker Novavax a $1.6 billion contract to develop a coronavirus vaccine, sending the company’s shares 30% higher.
But the stock market’s gains in recent weeks have come amid a backdrop of increasing coronavirus cases across the United States: The number of hospitalizations grew by 5% or more in 23 states over the weekend.
Many states have now paused reopening plans and reimposed lockdown restrictions altogether, amid fears that the country will have to shut down the economy again if the acceleration of new cases continues.
KEY BACKGROUND
“The relentless talk about rising case counts has really thrown a curve ball into all of the momentum we had,” says Tom Porcelli, chief economist for RBC Capital Markets. He points out that on the plus side, despite the rising number of hospitalizations in recent weeks, that hasn’t materialized into a significantly larger amount of deaths. But the recent spike in new cases across the South and West has derailed the rebound in the jobs market, with recent data showing that hiring has now been put on hold again. RBC continues to expect a long economic recovery, with a return to pre-Covid levels a “2021 event at best,” says Porcelli.
KEY BACKGROUND
The market’s losses followed a strong rally on Monday: The Dow jumped 450 points, the S&P 1.5%. Tech stocks rallied to lift the Nasdaq to a new record high, though they fell on Tuesday.
WHAT TO WATCH FOR
Atlanta’s Federal Reserve President, Rahael Bostic, told the Financial Times that the U.S. economic recovery will be “bumpier” as coronavirus cases rise in many states. He warned that economic activity, which rebounded after lockdowns were first lifted, is now “leveling off.”