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Shares closed lower on Friday amid concerns about the growing number of coronavirus cases in the United States and its impact on the economic recovery.
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The Dow closed at 730 points, or 2.8%. The S&P 500 fell 4.2% and the Nasdaq fell 2.6%.
Those losses were the second weekly drop in the leading averages in three weeks. The Dow and S&P 500 fell 3.3% and 2.9%, respectively, while the Nasdaq lost 1.9%.
“Coronavirus cases are on the rise and reopens are delaying, which will at least affect earnings,” said Tom Essaye, founder of The Sevens Report. “The resurgence of coronavirus cases is raising concerns that the rebound may be short-lived as voluntary or potentially more mandatory government economic closings are increasingly likely to occur.”
Texas Governor Greg Abbott said Friday that the state will reverse some of its reopening measures as coronavirus cases and hospitalizations continue to rise. “Right now, it is clear that the increase in cases is largely due to certain types of activities, including Texans who congregate in bars,” Abbott said in a statement.
Florida announced it would suspend “local consumption” of alcohol in state bars after reporting an increase of nearly 9,000 new cases of the virus. In Arizona, the number of cases increased by 5.4%, beating a seven-day average of 2.9%. Nationwide, the average daily number of confirmed coronavirus cases is now over 33,000.
Shares of companies that would benefit from an economic reopening fell. United Airlines, American and Delta fell more than 3%. Cruise operator The Norwegian Cruise line fell 5%.
Jon Hill, BMO’s rate strategist, said virus fears are causing investors to reconsider their positions before the weekend, which is similar to the trade action seen in March and April. This is favorable for bonds and negative for equities, as investors fear that the economy will not recover as sharply as expected. “It is very possible that part of the optimism we saw in the data may go back in July and August.”
The 5-year US Treasury yield fell to a record low of 0.29%. The 3-year rate also fell to a record low of 0.17%. Yields move inversely to prices.
Banks under pressure after the Fed stress test
The annual Federal Reserve stress test of major banks showed that some banks may approach minimum capital levels in scenarios related to the coronavirus pandemic.
Because of this, banks must suspend share buyback programs and limit dividend payments to current levels for the third quarter. Wells Fargo and Capital One may be forced to cut their dividends, according to an analyst at Morgan Stanley.
“While I hope that banks will continue to manage their capital and liquidity risk stocks wisely, and in support of the real economy, there is material uncertainty about the trajectory of the economic recovery,” said Fed Vice President Randall Quarles. .
The announcement sent some bank shares lower on Friday. Bank of America and JPMorgan Chase fell more than 5%. Wells Fargo fell 7.4% and Goldman Sachs fell 8.7%.
Meanwhile, Nike shares fell 7.6% due to a surprising quarterly loss for the clothing giant. The company reported a loss of 51 cents per share and revenue of $ 6.31 billion for its fiscal fourth quarter. Nike’s quarterly revenue reflected a 38% drop year-over-year.
Friday’s losses came despite a record increase in consumer spending in May. The Commerce Department reported on Friday that spending increased 8.2% last month, a positive sign for the US economy amid a growing number of negative coronavirus headlines.
The government report on how much Americans spent on goods and services in May was the largest profit in a month dating back to records that started in 1959. Consumer spending represents more than two-thirds of economic demand in the US. USA
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