Stocks end mostly lower, even as Nasdaq tops 10,000 points
Stocks closed a choppy day on Wall Street with broad losses Wednesday, despite fresh assurances from the Federal Reserve that it would keep interest rates low through 2022 and would continue buying bonds to help markets function smoothly.
The Standard & Poor’s 500 index fell 0.5%, extending its losses from a day earlier. The benchmark index had briefly climbed 0.5% following the release of the central bank’s latest policy statement. Most sectors finished lower, but a surge in technology sector stocks helped push the Nasdaq above 10,000 for the first time, giving the index its third record high close in a row. Bond yields were broadly lower, reflecting caution among investors.
The Fed has cut its benchmark short-term rate to near zero as part of a historic effort to gird the stock market and U.S. economy from the COVID-19 pandemic’s economic ravages. The central bank made clear Wednesday that it will keep providing support by buying bonds to maintain low borrowing rates. It also forecast no rate hike through 2022, which could make it easier for consumers and businesses to borrow and spend enough to sustain an economy depressed by business shutdowns and high unemployment.
The combination of low interest rates and low inflation has been a key driver for gains in big technology companies that can grow almost regardless of the economy.
The S&P 500 dropped 17.04 points to 3,190.14. The Dow Jones industrial average fell 282.31 points, or 1%, to 26,989.99. The Nasdaq composite gained 66.59 points, or 0.7%, to 10,020.35. Small-company stocks bore the brunt of the selling. The Russell 2000 index lost 39.66 points, or 2.6%, to 1,467.39.
Wall Street has been generally rising since late March, at first on relief following emergency rescues by the Fed and Congress. More recently, investors have begun piling into companies that would benefit most from a reopening economy that’s growing again. The S&P 500, a benchmark for many index funds, is now within 6% of reclaiming the all-time high it reached in February.
Still, uncertainty remains over how quickly economies can recover from the pandemic, given that the numbers of infections and fatalities are still rising in many countries.
A report Friday showing that the U.S. job market surprisingly strengthened last month helped stoke optimism among investors that the economy can climb out of its current hole faster than forecast. Employers added 2.5 million workers to their payrolls. Economists had expected them instead to slash an additional 8 million jobs.
But in remarks during a virtual news conference Wednesday, Fed Chairman Jerome H. Powell said the May jobs data, although encouraging, were hardly enough to ensure that the job market or the economy was back on track.
Airlines were among the big decliners Wednesday after Delta Air Lines warned in a regulatory filing that it expects its revenue in the second quarter to be down 90% from a year earlier. Delta fell 7.4%, American Airlines dropped 8.2% and Alaska Air Group lost 10%.
Two of the nation’s biggest mall owners fell sharply after Simon Property Group backed out of its $3.6-billion takeover of rival Taubman Centers. The buyout deal was signed in February, just before the pandemic began to spread in the U.S. Simon Property slid 4%, while Taubman plunged 20.1%.
Shares in electric-car and solar-panel maker Tesla closed above $1,000 for the first time, climbing 9% to $1,025.05. The stock also closed at a new high Monday. Tesla shares have more than doubled this year.
Bond yields fell. The yield on the 10-year Treasury slid to 0.72% from 0.82% late Tuesday. It tends to move with investors’ expectations of the economy and inflation, though it’s still well above the 0.64% level where it started last week.
Oil prices rose. Benchmark U.S. crude oil for July delivery rose 1.7% to settle at $39.60 a barrel. Brent crude oil for August delivery rose 1.3% to $41.73 a barrel.
European indexes closed broadly lower, while Asian markets ended mixed.
The pullback in global stocks came as the Organization for Economic Cooperation and Development said the coronavirus crisis has triggered the worst global recession in nearly a century and projected that the global economy will shrink by 6% this year in a best-case scenario, with only a modest pickup next year.
The estimate, which is based on an analysis of the latest global economic data, suggests an even sharper decline of 7.6% if there is a second wave of coronavirus infections this year.
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