Dow Plunges 943 Points; Steep Sell-Off Is Triggered By Fears Of More Lockdowns

Oct 28, 2020
Originally published on October 28, 2020 1:23 pm

Updated at 4:11 p.m. ET

Stocks fell sharply on Wednesday as a spike in coronavirus cases in the United States and Europe is raising the prospect of further lockdowns that could hurt the global economy.

At the close, the Dow Jones Industrial Average was down 943 points, a decline of 3.4%, and is in negative territory for the month. The S&P 500 fell 3.5%, its third consecutive decline, and is down over 8% from its record high in early September.

Losses accelerated Wednesday afternoon after Germany said it would close down restaurants and bars to contain a surge in coronavirus cases, while imposing other restrictions on social gatherings.

Germany's action comes as the rise in coronavirus cases is leading European countries such as Spain and Italy to declare states of emergency as well as restrictions.

In the United States, investors had been grappling with a wave of uncertainty that's already sent the market lower in recent weeks. The White House and Democrats in Congress have struggled to agree on a new relief bill, and the possibility of a contested election makes the likelihood of an agreement even murkier.

Now, the coronavirus appears to be surging in the United States as well, with 73,200 new cases on Tuesday alone, according to Johns Hopkins University.

Global lockdowns severely dented economies worldwide earlier during the pandemic, raising fears of a new hit should the spike in coronavirus cases accelerate.

In Illinois, which announced new pandemic guidelines Tuesday, officials are warning about a resurgence of infections and deaths.

"If I haven't made it clear, we are in that second wave that we have been alluding to for months," said Dr. Ngozi Ezike, director of the state's Department of Public Health.

The ongoing slowdown in economic activity is taking a toll on companies, especially those that depend on travel and tourism.

Boeing said Wednesday it plans to cut thousands of additional jobs through next year because of the decline in air travel. The airplane maker reported its fourth quarterly loss, sending its shares down 4.6%.

Losses in markets were widespread, with airlines and leisure stocks continuing to extend recent losses. United Airlines was down 4.6%, while Marriott International fell 3.7%.

The stock market losses comes a day ahead of the U.S. third-quarter gross domestic product data. The economy is expected to have grown at least at an annual rate of 30% in the July-September quarter, in the last report card before the election.

However, economists warn that the surge in growth reflects pent-up activity after lockdowns earlier this year, and worries are resurfacing about how a new wave of coronavirus cases would affect the global economy.

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ARI SHAPIRO, HOST:

This latest surge in new coronavirus cases, especially in Europe and the U.S., is having a big impact on financial markets. Stock prices were down sharply for the third day in a row, both in the U.S. and Europe. We're joined by NPR's Jim Zarroli.

Hi, Jim.

JIM ZARROLI, BYLINE: Hi, Ari.

SHAPIRO: So the Dow was down more than 900 points today. That is 3.4%. Is this all about the pandemic, or is something else going on here?

ZARROLI: No. As President Trump says, it's COVID, COVID, COVID, COVID. We're seeing COVID cases in the U.S. surpass the high levels they were at last summer. There's talk of more lockdowns, for instance, in Illinois - same thing in Europe. Germany just today said it was closing down all restaurants and bars for all of November. You're seeing a night curfew in Paris.

And this is - all this just hurts spending. I mean, people don't go out as much. They don't go to gyms. They don't go to retail stores and hotels. And that kind of thing makes investors nervous about where the economy is going. So United Airlines today was down - or I guess since Friday has been down 15%. Also, oil companies - they always do badly when the economy slows 'cause gas consumption goes down. So today we saw Exxon and Valero Energy and Chevron - all of them down.

SHAPIRO: You know, earlier this summer, there were a lot of coronaviruses cases, but the stock market still did pretty well. Why have things changed so much?

ZARROLI: Well, yeah, there was more optimism for a while. I think that the economy was going to weather the storm. You had some - you know, these big tech companies that actually benefited from the pandemic. I mean, people watch a lot of Netflix when they're staying home. And these stocks were pushing the market higher for a while. But I think now that that optimism is waning, I think many people are just coming to grips with the fact that the economy is really not going to recover completely as long as COVID's around. Unless there's a vaccine or some kind of big improvement in treatment, the pandemic is going to be this big weight on the economy's shoulders.

SHAPIRO: Maybe a stimulus bill would help, but Congress and the White House have not been able to negotiate one. What impact is that having?

ZARROLI: Definitely a factor. I mean, let's not forget, you know, of the 22 million jobs that have been lost in the U.S. since March, only about half of them have come back. It looked for a while like there could be an agreement of some kind. White House and Congress were working on an agreement, but they haven't made much progress. So there's a lot of bad blood now. And nobody really thinks there's going to be any kind of agreement before next week's election and maybe even not after that. So the stock market's pretty worried about what effect that's going to have.

SHAPIRO: Yeah. So there are two elephants in the room, the pandemic and the election. What impact does the uncertainty of the election having on stocks?

ZARROLI: Yeah. I mean, President Trump has warned that electing former Vice President Biden is going to cause a depression, is going to send everybody's 401K crashing through the floor. It doesn't seem like the markets agree. I mean, the odds have favored a Biden win for a while, and the market seems to have just shrugged it off. On the other hand, if the election is contested and we go through this long period of uncertainty and turmoil, you know, that's something investors don't like. And that definitely has a potential to throw a scare into the markets.

SHAPIRO: NPR's Jim Zarroli, thank you.

ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.