Thursday June 11th

11-06-2020

Stocks set to plunge at the open on virus second wave concern, Dow futures down 900 points

U.S. stock index futures fell sharply in early trading Thursday as coronavirus cases increased in some states that are reopening up from lockdowns. Shares that have surged recently on hopes for a smooth reopening of the economy dropped in premarket trading. Futures on the Dow Jones Industrial Average dropped 901 points, or 3.4%. The move implied an opening decline of about 865 points. S&P 500 futures fell 2.7%. Nasdaq-100 futures dropped 1.9%. Shares of United Airlines, Delta, American and Southwest all dropped more than 10% in premarket trading. Carnival Corp. and Norwegian Cruise Line shares fell more than 11%. Gap and Kohl’s shares also fell more than 8% each. Concerns about a second wave of coronavirus cases have risen as U.S. states push deeper into reopening. Texas has reported three consecutive days of record-breaking Covid-19 hospitalizations. Nine California counties are reporting a spike in new coronavirus cases or hospitalizations of confirmed cases, AP reported Wednesday. Friendly monetary policy from the Federal Reserve cannot “offset a severe COVID second wave,” said Dennis DeBusschere, macro research analyst with EvercoreISI, in a note. “With TX, AZ, CA new cases and hospitalizations increasing and investors concerned that recent protest will fuel a wave of infections, the risk of persistently weak economic and earnings growth has increased. S&P fair value estimates are falling as a result.” Overall coroanvirus cases in the U.S. topped 2 million, according to the latest figures from Johns Hopkins University. The downdraft in futures followed two straight days of losses for the 30-stock Dow and S&P 500 as investors ditched reopening trades for the megacap tech names. The S&P 500 dipped 0.5% on Wednesday, and the Dow slid about 280 points. Meanwhile, the Nasdaq Composite climbed 0.7% to a record closing high of 10,020.35, also its first-ever close above 10,000. The Nasdaq has risen for eight days in the past nine sessions, bringing its 2020 gains to nearly 10%. The S&P 500 is down 1.2% this year after briefly turning green for 2020 earlier this week. The Dow is down 5.4% for 2020. Both the S&P 500 and the Dow are still up more than 45% from the coronavirus low. The incredible comeback started with investors betting on technology companies like Amazon that were doing well despite the pandemic, but in the last month reopening bets like airlines have been the biggest gainers. Now investors are rotating back into those tech names and taking profits in the rest of the market. On Wednesday, investors assessed the Federal Reserve’s updates on the economy and monetary policy. The policymakers voted unanimously to keep interest rates unchanged and indicated no rate increases through 2022. “The Fed understands we are just in the beginning phases of the economic recovery and making rash changes to policy or forward guidance is premature at this time,” Charlie Ripley, senior investment strategist for Allianz Investment Management, said in an email. The Fed also said it will at least maintain the current pace of bond purchases for the coming months. Additionally, it expects the U.S. economy to contract by 6.5% in 2020 before expanding by 5% in 2021. Weekly jobless claims rose by 1.5 million last week, slightly less than the Dow Jones estimate of 1.6%. Continuing claims, which reflect the number of people receiving unemployment benefits for at least two weeks, declined by 339,000 to 20.9 million. Stocks in Asia Pacific fell on Thursday as the U.S. Federal Reserve indicated on Wednesday that it would keep interest rates near zero through 2022. The Nikkei 225 in Japan slipped 2.82% on the day to 22,472.91 while the Topix index shed 2.2% to close at 1,588.92. Over in South Korea, the Kospi slipped 0.86% to finish its trading day at 2,176.78. In Southeast Asia, Singapore’s Straits Times Index dropped 3.56% in afternoon trade. Hong Kong’s Hang Seng index closed 2.27% lower at 24,480.15. Shares of Chinese internet giant NetEase surged in their Hong Kong debut on Thursday, jumping more than 5% from their issue price. Mainland Chinese stocks fell on the day, with the Shanghai composite down 0.78% to around 2,920.90 and Shenzhen component 0.814% lower at approximately 11,243.62. Oil prices fell on Thursday, hit by another record build-up in U.S. crude inventories and the U.S. Federal Reserve’s projections that the world’s biggest economy would shrink 6.5% this year. Brent crude futures erased Wednesday’s gains, falling 3.5%, or $1.44, to $40.27 a barrel. West Texas Intermediate crude dropped 4.1%, or $1.62, to $37.98 a barrel. Gold edged lower on Thursday as investors booked profits after prices rallied to their highest in one week on the U.S. Federal Reserve’s commitment to provide extraordinary support for the country’s economy, hit by the coronavirus. Spot gold fell 0.2% to $1,733.18 per ounce, after hitting its highest since June 2 at $1,739.68 earlier in the session. U.S. gold futures climbed 1.2% to $1,741.40.