Stocks have their worst day since March on investors' worst fear: A 2nd outbreak
Clear the confetti from the NYSE floor... After an impressive three-month rally when the S&P 500 gained 45%, stocks just plunged. Investors bit their nails over health stats flowing out of newly reopened states:
- Texas reported its 3rd straight day of record COVID-19 hospitalizations (2,153 on Wednesday) — it was one of the first states to reopen.
- Florida had the biggest jump in cases since March, and South Carolina hit a record high. California said nine counties saw a spike in new cases and hospitalizations.
No parties at the Fed, either... On Wednesday, the Fed projected that it would keep interest rates close to zero through at least 2022. The Fed wants us to spend our $$$ on stocks/stuff and take out low-interest loans (instead of hoarding it in a savings account).
- Problem? That 2-year economic stimulation effort suggests the Fed's outlook is grim. The near-zero rates are aggressive, but the Fed thinks they're necessary to stay afloat.
- Even though unemployment filings last week were the lowest in 11 weeks, 21M Americans are still collecting unemployment benefits.
- Treasury Secretary Steven Mnuchin said that shutting down the economy again to slow the spread isn’t a viable option. Investors think it's possible (and panic-inducing).
Investors were ignoring the inevitable... Public health experts have said that when states re-open, infections will likely spike. Economists have said it'll take years, not months, to recover from the financial damage coronavirus wreaked. Buuut: falling cases, a wave of reopenings, and a surprisingly positive May job report kept investors optimistic. Markets were down just 5% from their record highs — until yesterday.