US stocks took yet another fall from green territory on Wednesday, with the Dow Jones Industrial Average index plunging more than 500 points after the Federal Reserve chief called for more to be done to strengthen the American economy.
The decline in stock values proved broad, with 11 of the S&P 500’s sectors finishing in the red. The index’s downturn was largely led by the energy and financial branches, which plummeted nearly 5% and 3%, respectively. As for the Dow Jones, Raytheon Technologies and Dow Inc. fell at least 5%, proving to be the index’s worst-performing stocks.
The major indices experienced their massive slump at midday trading, after several investors and Jerome Powell, the head of the US Federal Reserve, provided a dim outlook on an economic recovery.
Oil prices, meanwhile, slipped by more than 1%.
“All the stimulus in the world will not offset businesses closing their doors for an extended time,” he added.
Raich’s remarks come as Washington, DC, officials extended the national capital’s stay-at-home order to June 8 after failing to document a sufficient decline in COVID-19 coronavirus cases. The order was initially set to expire on May 15.
Additional Measures Needed to Support US Economy
Wednesday’s stock sell-off was further fueled by comments from Powell, who said in prepared remarks for a livestream with the Peterson Institute for International Economics that additional measures need to be implemented in order to help bolster the economy to a pre-COVID-19 level and avoid a prolonged recession.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” he continued, noting that the “scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II.”
Since the launch of various stay-at-home orders in the US, the Federal Reserve has initiated a multitude of measures to further support the economy, some of which include a slash in interest rates to zero and the creation of nine emergency lending programs.
US-China Trade Tensions Worry Investors
And then there’s the matter of escalating tensions between the US and China, more so regarding Beijing’s handling of the COVID-19 pandemic and the possible effects it may ultimately have on trading between the two countries.
Recently, US lawmakers introduced a new sanctions bill that would give Washington the authorization to impose taxes on China if it fails to provide a detailed account of the origins of the COVID-19 outbreak.
This is not the first time that China has slammed the US over its repeated accusations regarding the pandemic. In fact, US President Donald Trump has on several occasions suggested that the COVID-19 virus emerged from a lab in Wuhan, once the epicenter of the outbreak in China. However, such claims have since been rejected by officials, including those from the US.
Sophie Chardon, a strategist at Lombard Odier, told the Wall Street Journal that “more and more noise” will inevitably bolster the back and forth between US and Chinese officials and lead to an even more tense trade conflict.
0.00 (0%) 0 votes