Stocks declined sharply Wednesday after banking giants Bank of America (BAC) - Get Report and Citigroup (C) - Get Report reported first-quarter earnings that slumped following large provisions for loan losses, and data showed a U.S. economy deeply damaged by the coronavirus pandemic.
The Dow Jones Industrial Average finished down 445 points, or 1.86%, to 23,504, the S&P 500 was down 2.2% and the Nasdaq tumbled 1.44%.
Bank of America, the second-biggest lender after JPMorgan Chase (JPM) - Get Report, posted provisions for credit losses of $4.8 billion, even more than some of its counterparts, as the coronavirus pandemic shuttered the U.S. economy and pummeled stock and bond markets.
Citigroup, meanwhile, posted first-quarter earnings that were 46% lower than a year ago as the bank bulked up its loan-loss reserves by nearly $5 billion.
The losses Wednesday reversed Tuesday's solid gains as investors were heartened by signs the coronavirus outbreak was leveling off and efforts were being made to reopen businesses shut during the coronavirus pandemic.
"Intense rallies off of market lows are a common occurrence after extreme panic selling. Investors go from embracing a buy-the-dip mindsight to a pure FOMO (fear of missing out) mentality and entirely ignore the dangerous deterioration in leading economic indicators and earnings growth," said Andrew Smith, the chief investment officer of Delos Capital Advisors in Dallas.
"While relief rallies are the name of the game in these environments, they are more often than not met with walls of worry and a retest of market lows. The stock market has retraced roughly 25% since the lows and has ushered in a new wave of FOMO buyers as the propensity of missing the next upswing far outweighs the risk embedded within the market. While it is always more exciting to be the life of the bull party, we prefer to be fashionably late than painfully early," Smith added.
U.S. retail sales fell 8.7% in March, sharper than estimates that called for a decline of 8%. The declines last month - driven by stay-at-home orders that forced many businesses such as restaurants to shut their doors - were the most since the Commerce Department began compiling the data in 1992.
Meanwhile, the Empire State Manufacturing Index registered -78.2, a record low, as factory floors went dark during the coronavirus pandemic. Economists had expected a decline to -35.
The Federal Reserve, in its Beige Book survey released Wednesday, said "economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic.
“All districts reported highly uncertain outlooks among business contacts, with most expecting conditions to worsen in the next several months," the Fed added.
The number of confirmed global cases of the coronavirus has risen to 2,034,425, according to the Johns Hopkins Center for Systems Science and Engineering, and deaths increased to 132,276.
The U.S. has 619,607 cases of the coronavirus, the most in the world, according to Johns Hopkins CSSE. Deaths in the U.S. have risen to 27,866, also the most in the world.