Stocks are sinking again Monday on fears that new coronavirus infections could derail the economic recovery that Wall Street was sure was on the way.
The S&P 500 sank 2% in the first few minutes of trading, following up on even sharper losses in Asia and milder ones in Europe. U.S. stocks are now 12% below their record set in February, after a furious rally had brought them back within 5.8% in the middle of last week.
Case numbers are still growing in states across the country and nations around the world. Governments are relaxing lockdowns in hopes of nursing their devastated economies back to life, but without a vaccine, the reopenings could bring on further waves of COVID-19 deaths.“If globally, we are still in wave 1, then it is possible that without a vaccine, the big wave is still lying out there somewhere waiting to hit,” said Robert Carnell, regional head of research Asia-Pacific at ING.
That’s the biggest worry for markets: If infections swamp the world, governments could bring back the orders for people to stay at home and for businesses to shut down that sent the economy into its worst recession in decades. Even if that doesn’t happen, rolling waves of outbreaks could frighten businesses and consumers enough to keep them from spending and investing, which would itself hinder the economy.
That optimism sent the stock market on a second leg of its rally, which began in March after the Federal Reserve and Congress promised unprecedented amounts of aid to support the economy. All through its torrid rally, though, many professional investors were warning that the market’s gains may have been overdone considering how long and uncertain the economic recovery looked to be.
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