TOPLINE
The market tanked on Friday, with stocks taking a hit from both the Federal Reserve’s latest bank stress-test results and a new record number of daily coronavirus cases in the United States.
Wall Street remains worried about a spike in new cases across the country.
KEY FACTS
The Dow Jones Industrial Average fell 2.8%, over 700 points, on Friday, while the S&P 500 was down 2.4% and the tech-heavy Nasdaq Composite lost 2.6%.
Stocks continued to fall amid rising fears over a resurgence of coronavirus, with the United States posting a daily record of around 40,000 new cases, surpassing the previous peak in April, according to data from Johns Hopkins University.
New infections are spiking in more than 30 states, with many seeing record numbers—well into the thousands—of new infections each day. Texas and Florida, for instance, both paused their reopening plans on Friday.
Shares of companies that would benefit from a reopening of the economy—including airlines, cruise stocks and some retailers—subsequently plunged on Friday.
Bank stocks fell after the Federal Reserve on Thursday placed new restrictions on the banking industry for the first time since the aftermath of the 2008 financial crisis, requiring them to suspend share buybacks and cap dividend payments in the third quarter of 2020.
The Fed’s annual stress test found that “several” big banks could get uncomfortably near minimum capital levels if the coronavirus recession worsens.
The market’s losses came despite a record rise in consumer spending last month: The Commerce Department on Friday reported that spending increased 8.2% in May, its largest one-month gain ever.
Crucial quote
“As good as the recent economic data has been, we want to make it clear, it could still take years for the economy to fully come back,” says Ryan Detrick, senior market strategist for LPL Financial.
Tangent
Shares of Gap jumped more than 18% on Friday after the company announced a new partnership with Kanye West, who Forbes estimates has a net worth of $1.3 billion. Nike’s stock, on the other hand, plunged 7% after the company posted a surprise loss in the fourth quarter, with sales falling 38% from last year.
What to watch for
Chinese officials recently expressed “strong dissatisfaction” with U.S. sanctions that came in response to a new national security bill on Hong Kong, warning that crossing “red lines” and meddling in China’s “internal affairs” could put the trade deal at risk. “While still intact, the longevity of the phase one trade deal is increasingly in question for a host of reasons, with numerous triggers that could derail the agreement, including Hong Kong, Huawei, Taiwan, the South China Sea and several human rights issues,” Evan Rees, an Asia-Pacific analyst for Stratfor, a RANE company, told Forbes.
Key background
Stocks cut losses and turned positive in a volatile trading session on Thursday. The market at first opened lower on the back of more disappointing jobless claims data: Another 1.5 million Americans filed for unemployment in the week ending June 20, more than the 1.3 million expected. But bank stocks surged, leading the market higher, after federal regulators said they will loosen bank restrictions, including the Volcker Rule.
Further reading
China Warns U.S. ‘Meddling’ In Hong Kong Could Derail Phase One Trade Deal (Forbes)
Federal Reserve Places New Restrictions On Banks, Freezing Stock Buybacks And Limiting Payouts (Forbes)
Dow Plunges 700 Points As Investors Worry About A Resurgence Of Coronavirus (Forbes)
These Are The Only 4 States On Track To Contain Coronavirus (Forbes)
