Wall Street’s major indexes dropped on Friday as the US set a new record for a one-day increase in coronavirus cases and bank stocks tumbled after the Federal Reserve decided to cap shareholder payouts.
In the previous session, banks stocks had powered Wall Street’s main indexes higher, helping them offset investor fears due to rising virus infections in several US states, including Texas, Oregon and Utah.
Cases rose across the US by at least 39,818 on Thursday. Texas, which has been at the forefront of easing restrictions, paused its reopening plans after the state recorded its one of the biggest jumps in new infections.
“States are rethinking the reopening and that’s going to affect a lot of businesses,” said David Yepez, lead equity analyst and portfolio manager at Exencial Wealth Advisors in Oklahoma.
“We’re not going to test those March lows but there could be a correction, because we got a little bit too high.”
The uptick in cases has also threatened to derail a strong rally for Wall Street that brought the S&P 500 within 10.7 percent of its February all-time high on the back of record government stimulus measures.
The benchmark index was also testing its the 200-day moving average, an indicator of long-term momentum. If it closes below the key level, it could signal further losses.
Shortly after noon, the Dow Jones industrial average was down 592.59 points, or 2.3 percent, at 25,153.01, the S&P 500 was down 62.47 points, or 2.03 percent, at 3,029.20. The Nasdaq Composite was down 189.42 points, or 1.89 percent, at 9,827.58.
Nike dropped 6.1 percent as the footwear maker posted reported a surprise quarterly loss hurt by store closures due to the pandemic.
Gap surged 28 percent after it entered into a 10-year deal with rapper and fashion designer Kanye West to create a Yeezy line of clothing.
Data showed US consumer spending rebounded by the most on record in May, but the gains are not likely to be sustainable, as income declined and expected to fall further as millions lose their unemployment checks starting next month.
Friday also marks the reconstitution of the FTSE Russell indexes, including large cap Russell 1000 and small cap Russell 2000 , that often marks one of the biggest trading volume days of the year.
Declining issues outnumbered advancers for a 6.40-to-1 ratio on the NYSE and for a 5.92-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and no new low, while the Nasdaq recorded 39 new highs and 13 new lows.