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Concerns of Rising COVID-19 Cases Weigh on Market

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The reopening U.S. economy has been one of the main engines powering stock market activity for the past week-plus (subtracting last Thursday’s temporary meltdown), with commodity and equipment transportation, waitstaff and kitchen workers, and drug companies making strides in fighting the COVID-19 pandemic have all supported the overall bounce-back. After Fed Chair Jay Powell spoke last Thursday afternoon, asserting quite a different near-term future than that of a “V-shaped recovery,” the resulting sell-off was like cold water to the face.

The heat of bullish sentiment quickly returned, however — you can’t keep a good rebound down. Economic metrics came shooting back from often record-lows previously, and, while those metrics remain short of where we were this past winter, they are moving profoundly in the right direction.

Enter COVID-19 again: the pesky coronavirus has now claimed record daily spikes in new cases in the following states: Arizona, Florida, Oklahoma, Oregon and Texas. What do these states have in common? Two things: they all opened earlier than CDC guidelines determined they should, and these states mostly did not conform to things like wearing masks in public, maintaining social distancing, etc. Now that state officials and business owners in these states are beginning to take things seriously and shut down again, that robust sentiment now looks a little shaky.

Fed Chair Powell also finished a second and conclusive day of testimony on Capitol Hill today, again keeping a mild tone in describing what he sees as necessary calls for more financial support, which he declares has thus far had a positive impact on the domestic economy. Further, Powell said this is “not the time to worry about lowering Federal debt levels,” which he said “doesn’t present inflation risk” at this time, and urged stimulus to continue — especially at the state and local levels, and especially after July, when the current stimulus measures expire. Powell said it “would be a concern if support was pulled too fast.”

The S&P 500 ended regular trading Wednesday down 11.33 points, or -0.36%, though remains just 8% from its recent all-time high. The Nasdaq finished the session positive once again, albeit narrowly — +14.65 points, or +0.15%. The Dow slid into the close -170.85, or -0.65%. Consider that Boeing (BA - Free Report) and the big banks like JPMorgan (JPM - Free Report) and Goldman Sachs (GS - Free Report) were down, but the chip-makers and streaming entertainment firms, like Lam Research (LRCX - Free Report) and Netflix (NFLX - Free Report) , finished in positive territory.

We still have much to sort out these days, of course. Tomorrow morning brings us another Initial Jobless Claims report and a fresh Philly Fed index. Both look at June numbers, so we’ll be seeing some economic metrics in near-“real time.”

 

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