Dow plunges 710 points amid surging COVID-19 cases and oil-market skid

FILE PHOTO: Traders wear masks as they work on the floor of the New York Stock Exchange as the outbreak of the coronavirus disease (COVID-19) continues in the Manhattan borough of New York, U.S., May 27, 2020. REUTERS/Lucas Jackson     TPX IMAGES OF THE DAYReuters

  • US equities slid on Wednesday as rising coronavirus case counts around the world renewed fears of a slow economic recovery.
  • COVID-19 cases have increased in California, Texas, and Florida, driving concerns that economic reopenings will fuel a second wave of the pandemic.
  • Investors also braced for a new tariff announcement after a late-Tuesday notice said the Trump administration was mulling duties on $3.1 billion worth of European exports.
  • Oil fell, with West Texas Intermediate crude sliding back well below $40 per barrel at intraday lows.
  • Watch major indexes update live here.

US stocks slid on Wednesday as surging COVID-19 case counts in the US fueled concerns of a protracted economic downturn.

California, Arizona, Texas, Florida, and other states have recently seen large coronavirus outbreaks, leading some to question whether economic reopenings will be extended or reversed. Rising case counts in Germany and China suggest economic pain will last abroad as well.

Investors also braced for a new tariff announcement from the White House. The Trump administration is mulling duties on $3.1 billion worth of exports from France, Spain, Germany, and the UK, according to a notice from the Office of the US Trade Representative published Tuesday evening. Such action could place fresh pressure on US trade relations and spark a new conflict.

Here’s where US indexes stood at the 4 p.m. ET market close on Wednesday:

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“I imagine there will be significant resistance to restrictions being reimposed but the fear is that they are left with no other option and the recent trends we’re seeing in the data is a worry,” said Craig Erlam, a senior market analyst at Oanda Europe.

Travel stocks were among the session’s biggest losers. Airlines declined, led by Delta, Southwest, and United. Carnival Cruise Line and Royal Caribbean plunged further. Retailers including Gap and Macy’s also declined.

The International Monetary Fund further added to investors’ stressors. The organization forecasted an even deeper global recession than it did in April, calling for a 4.9% contraction to global gross domestic product in 2020. Its previous forecast saw global GDP sliding 3% through the year.

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Recovery from the decline is also projected to be worse than initially expected, with the IMF cutting its 2021 growth estimate to 5.4% from 5.8%. The coronavirus pandemic will leave behind severe economic scarring particularly focused on less fortunate communities, according to the organization’s Wednesday report.

“The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s,” the IMF said.

Oil fell amid concerns of prolonged demand weakness and rising inventories. The American Petroleum Institute reported a 1.75 million barrel increase to US inventories last week, bringing the total count to 545 million barrels. Economists expected a build-up of just 299,000 barrels, Reuters reported. An oversupply shock can flood the market with unwanted oil and drive prices sharply lower.

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West Texas Intermediate crude fell as much as 7.6%, to $37.31 per barrel. Brent crude, the international benchmark, slipped 7%, to $39.63, at intraday lows.

Wednesday’s decline came after moderate gains on Tuesday. Soaring tech names pushed the Nasdaq composite to a record high. Bank stocks followed close behind as investors received positive signs from new home sales data and IHS Markit’s US purchasing managers’ index.

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