The Dow Jones struggled on Tuesday following a breakneck rally to start the week.
Bullish momentum on Wall Street appears to have stalled.
ABN AMRO believes the risk of a coronavirus outbreak setback remains high as many states reopen for business.
The Dow Jones struggled on Tuesday, and even high-profile testimony from Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell failed to give the stock market meaningful support.
There’s a strange mixture of fear and optimism on Wall Street. Coronavirus data appears to be moving in the right direction, but as the pandemic surpasses weighty milestones – 1.5 million cases in the U.S. and nearly 5 million worldwide – it’s prompting some reflection about the extent of the damage.
The Dow Fell Because Coronavirus Risks Lurk as Economy Reopens
The stock market’s major indices diverged on Tuesday, though none of them traded with much conviction.
The Dow fell 249.34 points or 1.01% to 24,348.03.
The S&P 500 dipped 0.49% to 2,939.46.
The Nasdaq ticked 0.21% higher to 9,254.33.
Jerome Powell and Steven Mnuchin’s testimony in the Senate had almost no discernable effect on the Dow. Neither official was prepared to rock the boat, nor did they give investors any new information worth trading on.
Crude oil hovered around the $32 handle, providing some underlying support to the stock market. Though this price is still low, it is lightyears above the negative prices that were seen last month.
The ramifications of this would usually be considered quite severe. But given how bad most of the data looks in all facets of the domestic economy, investors have not been reacting much to even the ugliest of statistics.
The reopening is moving roughly in line with the base case, which importantly does not assume any renewed spike in virus cases that requires a re-imposition of restrictions. Given that it is still very early days in the reopening, that risk remains significant. More broadly, we continue to expect the reopening process to be a gradual one.