Stocks fell sharply on Wednesday as traders grew worried about the increasing number of newly confirmed coronavirus cases, which raised concern about the economic reopening and recovery. 

The Dow Jones Industrial Average dropped 727 points, or 2.8%. The S&P 500 traded 2.8% lower while the Nasdaq Composite slid 2.6%. The tech-heavy Nasdaq was headed for its first daily decline in nine sessions. 

The major averages hit their lows of the day after Florida said its confirmed cases jumped by 5,508 on Tuesday, a record, and now total 109,014. The state also said its positivity rate rose to 15.91% from 10.82%. Meanwhile, New York, New Jersey and Connecticut ordered visitors to quarantine for 14 days.

“The latest coronavirus news is not positive for the stock market which was betting the worst of the pandemic recession was behind us,” said Chris Rupkey, chief dinancial economist at MUFG. “All the hopes of investors looking for a better economy to improve the bottom lines of companies shut down in the recession have been dashed. Forget about the fears of the virus coming back in the fall, the number of new cases and hospitalizations in states like Arizona, Texas, and Florida says the threat is happening right now.”

A CNBC analysis of Johns Hopkins University data found the U.S. 7-day average of coronavirus cases surged more than 30% from a week ago after the total number of cases grew by more than 31,000 on Monday. California is one of the states that has seen a dramatic spike in cases, adding more than 6,000 on Monday alone. In Texas, the Covid-19 hospitalization rate has hit a record for 12 straight days. 

Overseas, Germany reported a cluster of newly confirmed cases at a slaughter house in Lower Saxony. That’s the latest in a series of coronavirus outbreaks in Germany. 

Shares of companies primed to benefit from the economy reopening faltered. United Airlines fell 8.4%. Delta, American and Southwest all slid over 6%. Carnival, Norwegian Cruise Line and Royal Caribbean were lower by 11.4%, 12.4% and 11.4%, respectively. Retailer Gap also fell 9.1%. Disney, meanwhile, fell 4.3% after its theme park workers petitioned to postpone the reopening amid the spike in cases in Florida. 

The “market is going down on this…bottom line,” Evercore ISI strategist Dennis DeBusschere wrote in an email. It “brings up the question: What will California do? They have had consistent case growth and never really opened up.”

Masks and social distancing, which had been enforced to varying degrees across the country in recent week, “will become the norm nationally,” the strategist wrote.

He added that the Covid numbers also have implications for politics and policy that the market may not like. Specifically, DeBusschere argued that the infection spike weighs against President Trump’s odds of reelection and reinforce the case for even more fiscal stimulus from Congress.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said Tuesday the U.S. is seeing a “disturbing” surge in new Covid-19 cases.

“Markets pause with all eyes on the virus and the reopening heading into the summer months,” said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities, in a note.  The health side is back front and center as both monetary and fiscal liquidity has been factored in short-term. We have entered a new phase of this crisis.”

Wall Street was coming off a banner day, with the Nasdaq Composite posting its 21st closing record for 2020 on Tuesday. The Nasdaq’s gain on Tuesday also represented its eighth straight day of gains, its longest winning streak since December, when it advanced for 11 straight sessions. 

—CNBC’s Tom Franck and Jeff Cox contributed to this report.

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