US markets fall despite signs of easing of coronavirus cases

The Dow Jones Industrial Average ended the day at a loss after initially surging more than 900 points.

Investors worry that coronavirus-related shutdowns could significantly slow economic growth in 2020 [File: Bloomberg]
Investors worry that coronavirus-related shutdowns could significantly slow economic growth in 2020 [File: Bloomberg]

Not even early signs that coronavirus deaths could be plateauing seemed to ease investor fears.

Despite an early gain of 900 points, the Dow Jones Industrial Average ended the trading session down 0.12 percent to close at 22,653.86. The S&P 500 – a gauge for the performance of US retirement and college savings plans – lost 0.16 percent. The Nasdaq Composite Index dropped 0.33 percent.

So much of United States business activity has been shut down to encourage social distancing and reduce the spread of the coronavirus that many businesses are worried they may not be able to survive the drop in sales. Investors worry the longer companies stay closed, the more likely they are to go bankrupt.

Goldman Sachs analysts warn a so-called “wave of bankruptcies” might lead firms to stop paying their bills, causing a ripple effect of missed payments that could undermine confidence in ordinary business transactions.

“One way that the coronacrisis could have long-lasting scarring effects is by sparking a wave of bankruptcies as revenues plummet in many industries,” Goldman wrote in a report on Tuesday.

“During the last recession, a spike in firm closures and a dip in new firm openings left a ‘lost generation’ of firms that slowed the recovery,” Goldman added.

On Tuesday, New York Governor Andrew Cuomo told reporters that his state had experienced its most significant one-day jump in deaths, but he also delivered good news, saying hospitalisations were on the decline.

Louisiana Governor John Bel Edwards said this week that new hospital admissions were trending down in his state – also among the hardest hit in the US.

Still, the trend is far from certain, as is the outlook for how quickly the US economy can bounce back from coronavirus disruptions.

“The outlook for the broad market going forward really depends more on the recovery and the ability of the Fed and other policymakers to keep banks healthy,” Steven Ricchiuto, chief US economist at Mizuho Securities, wrote in a note to clients. “So, assuming we begin to unwind the lockdown by early May, we look for the equity market to have made up most if not all of its losses by this time in 2021.”

Source : Al Jazeera, News Agencies

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