U.S. stocks dropped sharply on Thursday as investors weighed sobering economic forecasts and new data, along with indications that the COVID-19 pandemic is far from subsiding.
The Dow Jones Industrial Average closed down 1,861 points, or 6.9 percent, and the S&P 500 was down 5.9 percent, the biggest fall since March 16. Just a day before, the Nasdaq Composite hit an intraday high.
On Thursday, several sectors including hospitality and leisure suffered steep declines. As more than 20 states report a climb in coronavirus cases, there are new worries that consumers will be reluctant to return to restaurants and take trips.
During a news conference on Wednesday, Federal Reserve Chairman Jay Powell said the central bank is committed to keeping interest rates near zero, highlighting the uncertainty surrounding the timing of an economic recovery.
According to the Johns Hopkins Coronavirus Resource Center, there have now been more than 2 million confirmed cases of COVID-19 in the United States, and 115,000 deaths.
In his remarks, Powell again acknowledged the risks of a “second wave” after states reopen their economies.
“You could see a public loss of confidence in parts of the economy that will be already slow to recover,” he said.
Thursday morning, the Department of Labor released its latest report on weekly jobless claims showing that last week, more than 1.5 million people filed for unemployment benefits for the first time. Even though weekly claims have declined from their peak in March, the numbers are still staggering. Since the pandemic began over 44 million people have filed initial unemployment claims.
Investor optimism was buoyed by a monthly jobs report that contained an unexpected addition of 2.5 million jobs in May, shocking many economists and policymakers who predicted continuing losses.
While the Fed chairman didn’t dismiss the jobs report, he urged lawmakers who are debating another stimulus package not to dismiss its numbers. Powell praised the House and Senate for the fiscal relief they have passed so far, but indicated that it may not be enough.
"It’s possible that we will need to do more, and it’s possible that Congress will need to do more,” he said.