By Yasin Ebrahim
Investing.com – The Dow closed above session lows on Wednesday, but investor sentiment got a gut check as dire economic data and earnings dampened hopes of a quick economic recovery.
The Dow fell 1.86%, or 445 points, but had fallen by as many as 716 points at the lows of the day. TheS&P 500 slipped 2.2% and the Nasdaq Composite fell 1,44%.
Growing expectations the economy is set to open sooner rather later has underpinned investor hopes it could be set for a robust recovery, but economic data, including a record plunge in retail sales, suggested the optimism may have been overdone.
The Commerce Department said on Wednesday that retail sales fell 8.7% last month, confounding economists’ forecasts for an 8% decline. But the retail sales control group – which has a larger impact on U.S. GDP – rose 1.7%, compared with a forecast for a 2% decline.
Manufacturing activity in New York, which had already been under pressure pre-coronavirus pandemic, deteriorated further, also fell a record low reading of -78.2.
Underscoring the impact of the Covid-19 pandemic, the Federal Reserve's Beige Book economic report warned further job cuts are expected in the coming months and the economic conditions are set to worsen.
The bleak outlook on the labor market comes just a day ahead of the weekly jobless claims report due Thursday.
On the earnings front, meanwhile, Wall Street banks continue to flag further economic uncertainty ahead.
Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and Bank of America (NYSE:BAC) reported a widely-expected plunge in profit, with latter closing more than 6% lower.
The trio of banks also increased their reserves for credit losses by billions of dollars amid expectations for a jump in loan defaults from customers in the coming months.
Energy led the broader market, paced by a decline in oil prices to more than an 18-year low despite reports the White House is mulling plans to pay drillers to stop production in order to combat the glut in crude supply and save jobs.
Fears over a glut in supplies, led by a coronavirus-led hit to demand intensified as the Energy Information Administration reported a weekly crude build of 19.25 million barrels.