Dow falls 445 points as coronavirus lockdown weighs down earnings

Wall Street had a bad day. Stocks finished lower as investors came to terms with a slew of dismal economic data and first-quarter earnings reports that painted a dire picture of economic shocks caused by the COVID-19 global pandemic.

The Dow Jones Industrial Average ended the day down 445.41 points or 1.85 percent in New York. The broader S&P 500 – a barometer for the performance of US retirement and college savings plans – fell 2.20 percent. The tech-heavy Nasdaq Composite Index was down 1.44 percent.

Dim prospects for the rest of the corporate reporting period are weighing on investor sentiment, said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. With debt piling up on corporate books, in the coming weeks, “it’s going to be more important to look at companies … from a debt perspective,” he said, noting: “I’m not sure the recovery is going to be as strong as everybody is saying.”

“Today’s economic data reminded everyone that we have very little insight into what the next six to 12 weeks will look like for the United States,” said Liz Miller, President, Summit Place Financial Advisors.

Snapshots of the US economy continue to validate the view of most economists that the US is looking at its worst recession since the Great Depression of the 1930s.

On Wednesday, the New York Fed’s Empire Manufacturing Index showed factory activity in New York state – a hot zone in the US for the coronavirus pandemic – plummeted in April to its lowest level on record.

The Federal Reserve reported that total industrial production in the US fell 5.4 percent in March, and manufacturing output fell 6.3 percent as factories closed their doors late in the month to stem the spread of COVID-19, the disease caused by the coronavirus.

“The decreases for total industrial production and for manufacturing were their largest since January 1946 and February 1946, respectively,” the Fed noted.

Economists at Oxford Economics said in a note to clients on Wednesday that factory activity is likely to fall even further in April, warning: “We anticipate industrial production will shrink by nearly 15% peak to trough.”

The US Commerce Department reported on Wednesday that retail sales collapsed by 8.7 percent in March – also a record drop. While the fall was not as bad as some analysts were expecting, the reading is a key gauge of US consumer spending – the engine of the US economy – and the outlook for April is bleak.

“With clear signs of panic buying of necessities and the fact that lockdowns were introduced only around the middle of the month means that far worse is to come in April and the second quarter more generally,” Capital Economics senior US economist Michael Pearce wrote in a note to clients.

On the corporate earnings front, Bank of America, Goldman Sachs Group Inc and Citigroup Inc on Wednesday all reported that first-quarter profits fell 45 percent or more. The banks joined JPMorgan Chase & Co and Wells Fargo & Co in telling investors they are setting aside billions of dollars in funds in expectation of a potential tsunami of loan defaults from businesses buckling under the strain of lockdowns.

The Dow financial sector was down more than four percent in morning trading.