Stock losses accelerated by midday Thursday, as virus cases in the U.S. have seen a meaningful surge of late.
All three major U.S. indices got hammered Thursday, with the S&P 500 down as much as 4.3% just after noon. The 10-Year Treasury yield fell several basis points to 0.67%. In the morning, the S&P 500 was down less than 3% and the 10-Year Yield was at 0.68%.
The S&P 500 is down more than 5% this week, more than halfway, in percentage point terms, to a correction.
According to data from Johns Hopkins, the 5-day moving average of new virus cases is now 27,000, up from a prior reading of 11,000 earlier in the month. States like Florida and Texas have seen a spike, which may cause these states to rethink reopenings.
“Our analysis demonstrates higher testing is not the main driver of new cases,” wrote Matthew Harrison, Morgan Stanley biotech analyst in an note. “We conclude active community spread is likely still ongoing."
Airlines and banks have been hit particularly hard. United Airlines (UAL) is down 14% while the Invesco KBW Bank ETF (KBWB) , which is about 70% weighted towards the highly yield curve-sensitive regional banking business, is down 7.6%. The yield curve between the 2-Year and 10-Year treasuries has contracted significant in the past few weeks.
There’s a sense on Wall Street Thursday that, while we may see a sustained sell-off, it may not be quite as severe as the bear market of early 2020 was. This, because investors are fully confident that the Federal Reserve is on board to save risk assets, keeping borrowing costs for companies low.
However, the market may need to see another fiscal stimulus bill passed to get cash directly to households, Steve Friedman, former Senior Staffer at the New York Fed and Macroeconomist at MacKay Shields, told TheStreet.
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