Buckle up, Wall Street investors!
The ride from here could get a lot bumpier after the Dow registered its worst one-day loss since June 11 on Friday, knocking the blue-chip index to its lowest point since May 26, and at least momentarily knocking the wind out of equity investors who may be gradually losing their bullish thesis as U.S. COVID-19 infection rates climb higher.
Over the past week, the acceleration of the daily rate of new coronavirus cases in several American states has prompted investors to re-think the uptrend that has taken the Dow Jones Industrial Average DJIA YM00 and S&P 500 index SPX ES00 roughly 35% higher from their late-March lows and the technology-laden Nasdaq Composite COMP NQ00 more than 40% from its recent 2020 nadir.
The U.S. recorded more than 45,000 cases Friday, according to data compiled by Johns Hopkins University, far exceeding the record 39,972 cases reported Thursday and further injecting doubt into upbeat projections for a speedy economic recovery from pandemic that stalled business activity for nearly four months.
The rise in new coronavirus cases on Friday prompted Texas and Florida governors to reverse some business reopening measures, after those states were among the earliest to attempt to restart economies that had been facing severe social-distancing restrictions to curtail the spread of the contagion. Texas reported 6,426 new coronavirus cases Thursday and Florida reported over 8,900.
The resurgence of the pathogen appeared to be sufficient cause for the White House Coronavirus Task Force, consisting of Vice President Mike Pence and the U.S.’s top public-health experts, which had gone quiet since April 27, to hold its first briefing since then on Friday.
For many investors who MarketWatch spoke with, the outlook for the market starts and ends with the epidemic subsiding or at least the discovery of credible treatments and vaccines.
However, there are a number of factors that also have the potential to exacerbate volatility in financial markets next week and into July.
Of course, those factors include the lingering effects of the pandemic but also a spate of issues that could create additional angst for equity investors:
- Rising infections and hospitalizations of COVID-19 cases
- Economic surprises from the U.S. Labor Department’s monthly jobs report due Thursday
- Quarter-end and month-end rebalancing of portfolios by pensions and mutual funds
- Stalled plans for further economic stimulus from Congress
- Joe Biden’s lead in presidential polls
- Market technicals used by some investors as decision making tools
- Low stock market volumes in a holiday-shortened week ahead of the July Fourth to be observed on Friday
Asked how he would rank the numerous problems Jamie Cox, managing partner for Harris Financial Group, told MarketWatch that the epidemic is first and foremost.
He said “everything starts and stops with the virus. All other effects are predicated on the outcome of the first.”