By Stephen Culp (NYSE:CULP)
NEW YORK (Reuters) - Wall Street tumbled in a broad sell-off on Thursday, with the Dow plunging well over 5%, as a cautionary economic forecast from the U.S. Federal Reserve and the prospect of a possible resurgence of COVID-19 infections put investors in risk-off mode.
The S&P 500 and the Dow were on course for their worst day since March 18, when markets were shocked by the abrupt economic lockdowns put in place to curb the coronavirus pandemic. The Nasdaq was set to snap a three-day streak of record closing highs.
Everything's for sale," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. "There's fear we're near a top."
"The chatter today is back on the virus and the potential for a second wave of the virus," he said.
Deaths of Americans from COVID-19 could reach 200,000 in September, a grim result of the United States' economic re-opening before getting growth of new cases down to a controllable level, according to a leading health expert.
At the conclusion of its two-day monetary policy meeting on Wednesday, the U.S. Federal Reserve released its first pandemic-era economic outlook, after which Chair Jerome Powell warned of a "long road" to recovery.
Economic data appeared to back up the Fed's dour economic projections, with jobless claims still more than double their peak during the Great Recession and continuing claims at an astoundingly high 20.9 million.
A year-on-year drop in core producer prices also reflected the central bank's disinflationary concerns.
"The (economic) data points are so far away from consensus, it's hard to say we're headed in the right direction," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. "We're going to have fits and starts, and it won't be a smooth ride until the end of the year."
The CBOE volatility index (VIX), a barometer of investor anxiety, hit its highest level since May 14.
The Dow Jones Industrial Average (DJI) fell 1,514.08 points, or 5.61%, to 25,475.91, the S&P 500 (SPX) lost 152.93 points, or 4.79%, to 3,037.21 and the Nasdaq Composite (IXIC) dropped 396.55 points, or 3.96%, to 9,623.80.
All 11 major sectors of the S&P 500 were in the red, with energy (SPNY) and financials (SPSY) suffering the largest percentage drops.
Interest rate-sensitive banks <.SPXBK> slipped 8.3%, after the Fed indicated key interest rates would remain near zero through at least 2022.
Travel-related companies, among the hardest hit by mandated lockdowns, were sharply lower.
The S&P 1500 airlines index <.SPCOMAIR> tumbled 10.9%, while Norwegian Cruise Line Holdings Ltd (N:NCLH) and Royal Caribbean Cruises Ltd (N:RCL) dropped 15.4% and 11.4%, respectively.
Boeing Co (N:BA) shed 10.7% after its top supplier Spirit AeroSystems Holdings Inc (N:SPR) announced a 21-day layoff for staff doing production and support work for Boeing's 737 program.
Declining issues outnumbered advancing ones on the NYSE by a 18.02-to-1 ratio; on Nasdaq, a 12.27-to-1 ratio favored decliners.
The S&P 500 posted 4 new 52-week highs and no new lows; the Nasdaq Composite recorded 18 new highs and eight new lows.