(Reuters) – Wall Street’s main indexes fell on Wednesday after Federal Reserve Chairman Jerome Powell warned of an extended period of weak growth and stagnant incomes due to the coronavirus pandemic.
FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon
It will take some time for the U.S. economy to get back to where it was, Powell said in a webcast, and called for more fiscal stimulus.
“Powell’s doing the right thing by warning people that this is not just going to be a V-shaped recovery,” said Sam Hendel, president and co-portfolio manager of New York-based Levin Easterly Partners.
“I think the market may be overstating the ease of returning back to normal.”
However, Powell made it clear that the Fed won’t push interest rates below zero, as traders had been increasingly betting.
The three main U.S. stock indexes have climbed about 30% from their March lows as investors bet on a pickup in business activity after various states eased virus-induced lockdowns that have caused mass layoffs and disrupted supply chains.
However, the rally paused this week on fears of a second wave of COVID-19 infections following a spike in new cases in Germany, South Korea and China and a warning from a top U.S. health expert.
At 11:31 a.m. ET, the Dow Jones Industrial Average .DJI was down 307.23 points, or 1.29%, at 23,457.55, the S&P 500 .SPX was down 26.48 points, or 0.92%, at 2,843.64. The Nasdaq Composite .IXIC was down 48.44 points, or 0.54%, at 8,954.12.
Energy .SPNY dropped 2.5%, the steepest percentage losses among the 11 major S&P sectors. Interest rate-sensitive banks stocks .SPXBK shed 4%, tracking a slight drop in U.S. Treasury yields.
Wall Street’s fear gauge rose for the second day to hit a one-week high.
“Volatility is likely to persist because there’s a lot of uncertainty on how this virus plays out,” said Brian Levitt, Global Market Strategist for Invesco.
Royal Caribbean Cruises (RCL.N) launched a $3.3 billion bond offering, pledging 28 of its ships as collateral and forecast heavy losses for the first quarter. Its shares fell 6.8%.
Declining issues outnumbered advancers for a 4.22-to-1 ratio on the NYSE and for a 3.32-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and 10 new lows, while the Nasdaq recorded 28 new highs and 71 new lows.
Reporting by Medha Singh and Ambar Warrick in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila