Fred Imbert,Yun Li
Stock futures fell sharply in early trading Thursday as coronavirus cases increased in some states that are reopening up from lockdowns. Shares that have surged recently on hopes for a smooth reopening of the economy dropped in premarket trading.
Futures on the Dow Jones Industrial Average dropped 688 points, or 2.5%. The move implied an opening decline of about 700 points. S&P 500 futures fell 2.2%. Nasdaq-100 futures dropped 1.6%.
Shares of United Airlines, Delta, American and Southwest all dropped more than 10% in premarket trading. Carnival Corp. and Norwegian Cruise Line shares fell more than 11%. Gap and Kohl’s shares also fell more than 8% each.
Concerns about a second wave of coronavirus cases have risen as U.S. states push deeper into reopening. Texas has reported three consecutive days of record-breaking Covid-19 hospitalizations. Nine California counties are reporting a spike in new coronavirus cases or hospitalizations of confirmed cases, AP reported Wednesday.
Overall coroanvirus cases in the U.S. topped 2 million, according to the latest figures from Johns Hopkins University.
The downdraft in futures followed two straight days of losses for the 30-stock Dow and S&P 500 as investors ditched reopening trades for the megacap tech names. The S&P 500 dipped 0.5% on Wednesday, and the Dow slid about 280 points. Meanwhile, the Nasdaq Composite climbed 0.7% to a record closing high of 10,020.35, also its first-ever close above 10,000.
The Nasdaq has risen for eight days in the past nine sessions, bringing its 2020 gains to nearly 10%. The S&P 500 is down 1.2% this year after briefly turning green for 2020 earlier this week. The Dow is down 5.4% for 2020.
Both the S&P 500 and the Dow are still up more than 45% from the coronavirus low. The incredible comeback started with investors betting on technology companies like Amazon that were doing well despite the pandemic, but in the last month reopening bets like airlines have been the biggest gainers. Now investors are rotating back into those tech names and taking profits in the rest of the market.
Crude oil lost 4% in early trading.
On Wednesday, investors assessed the Federal Reserve’s updates on the economy and monetary policy. The policymakers voted unanimously to keep interest rates unchanged and indicated no rate increases through 2022.
“The Fed understands we are just in the beginning phases of the economic recovery and making rash changes to policy or forward guidance is premature at this time,” Charlie Ripley, senior investment strategist for Allianz Investment Management, said in an email.
The Fed also said it will at least maintain the current pace of bond purchases for the coming months. Additionally, it expects the U.S. economy to contract by 6.5% in 2020 before expanding by 5% in 2021.
Investors are awaiting the new jobless claim data for the week ending June 6, which is set to come out at 8:30 a.m. ET on Thursday. Economists polled by Dow Jones expect filings for unemployment insurance claims to total 1.595 million last week, which is down from 1.775 million in the week before.