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Has a Second Virus Wave Triggered Another Correction? Stocks Down 1%

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Stocks fell Thursday and are down significantly in the past two weeks. A second wave of coronavirus infections continues to spark fear in markets, as the S&P 500 is roughly halfway down towards a correction. 

All three major U.S. indices fell with the S&P 500 down much as 1.7%. The 10 year treasury yield slipped to 0.62%, as investors moved into safety. Yields fall when prices rise. Crude oil did rise 3% to $26 a barrel, but that did not calm investor sentiment. 

The S&P 500 is now down about 5% since the index hit 2,940 on April 29. That was the highest level it had reached since hitting its low on March 23. A correction is a move down by at least 10%. And in just three days the 10 year treasury yield is down 10 basis points. 

Cyclical sectors were losing more than the broader market was — industrials and consumer discretionary stocks were among the big losers. Even with oil prices rising, the Energy Select SPDR ETF  (XLE)  fell 2.6%, as bearishness on an economic recovery sets in, especially after Federal Reserve Chairman Jerome Powell said Wednesday that the recovery was not looking exactly like a V-shaped one. 

The big fear: premature state reopenings could lead to a significant reacceleration in virus cases. 

“With certain states beginning the opening-up process in May, we may see further spread of the coronavirus in the near future,” wrote strategists at Commonwealth Financial Network in a note. "Ultimately, if efforts to combat the spread of the coronavirus meet any significant headwinds, further market volatility is likely. As such, we are keeping the overall market risk indicator at a red light.”

A secondary source of poor market sentiment was the jobless figures. Weekly jobless claims were 2.9 million, versus economists estimates of 2.5 million. 

As for stocks cutting through the headwinds Thursday, Cisco  (CSCO)  rose 5%, after earnings showed that software products are in high demand in the work-from-home environment. 

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