“Wishful thinking has given way to practical reality when it comes to covid-19,” said Daniel P. Wiener, chairman of Adviser Investments. “Warm weather and a reduction in the rate of deaths does not give people the right to go out and party. They partied, the market partied and the hangover begins.”
The Standard & Poor’s 500-stock index fell 80.96 points, or 2.6 percent, to close at 3,050.33. The broad index, like the Dow and Nasdaq composite index, is on track for one of its best quarters in decades. The S&P is down 5 percent in 2020.
The Nasdaq, whose technology stocks have powered markets out of their spring depths, snapped an eight-day winning streak on Wednesday, falling from its all-time high. The Nasdaq slid 222.20 points, or 2.2 percent, to close at 9,909.17.
The sell-off was wide and deep, marking the steepest drop since June 11. Crude oil fell 5.8 percent. European indexes closed down 3 percent. Asia was mostly flat. Even highflying mega-tech stocks like Microsoft, Apple and Alphabet finished negative.
Energy, industrials, real estate and financials — tied to a reviving economy — led all 11 stock market sectors into the red as Florida, Texas and Arizona reported spikes in virus infections. Cruise lines fell more than 10 percent. Airline stocks dove after officials in New York, Connecticut and New Jersey announced quarantines on incoming travelers from virus hot spots.
“Markets have been looking past the negative headlines on the economy for many weeks,” said Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers. “However, the health crisis risk that appears to be accelerating in many states with the reopening process has started to give investors pause.”
Shareholders may also have to reevaluate their expectations for next year’s corporate profits, he said, which are projected to recover sharply but may change if shutdown measures are reinstated by government leaders.
“Just when it looks like the markets are shaking themselves free of coronavirus another bout of worry returns to put them on their back,” Russ Mould, investment director at AJ Bell, wrote in a note to investors.
Wall Street also digested the news of new travel restrictions in the northeast. New York Gov. Andrew M. Cuomo (D) announced Wednesday that New York, along with New Jersey and Connecticut, will require some nonresidents entering any of the three states to self-isolate for two weeks after they arrive.
While such regional measures may not hinder the economy as much as a nationwide shutdown, the mixed signals and stutter-step nature of the recovery could drag down the stock market, Mould said.
As central bankers and grim economic data point to a slow, years-long recovery, investors have nonetheless been buoyed in recent weeks by government relief measures and a commitment from the Federal Reserve to keep interest rates near zero for years.
There are some signs — including retail sales, jobs data and manufacturing indexes — that suggest business activity across the globe is slowing its decline or even starting an upswing. New York City is in the process of reopening after being shut down for months. Airline traffic is slowly creeping back. Oil prices have begun to recover as drivers return to the road.
But optimism that businesses will climb out of the recession has also been checked by a resurgence in infections. More than 30 states and U.S. territories have reported a higher rolling average of infections compared with last week, according to data tracked by The Washington Post. In recent days and weeks, some states and businesses that had been scheduled to reopen have since reversed course and delayed their plans, fearing that the coronavirus will spread further.
“It’s becoming increasingly difficult to reconcile the green shoots we are seeing in economic activity with the rising infection rates in many states,” said Kristina Hooper, Invesco chief global market strategist.