Dow ends down 730 points as Texas, Florida economies stall due to virus
NEW YORK, NY -- The Dow and the broader U.S. stock market tumbled Friday as investors grew increasingly worried as the great reopening of the economy began stalling as Covid-19 cases rise across the country.
Texas Gov. Greg Abbott ordered further restrictions on local businesses on Friday, one day after the reopening was "paused" to contain the surge in new infections. Florida on Friday also clamped down on businesses to stem a record-breaking spread of the virus there.
Stocks sold off sharply to end the week. The Dow and the Nasdaq Composite recorded their worst day since June 11, when the market tanked because of similar virus concerns.
The Dow closed down 730 points, or 2.8% lower. Only one Dow stock -- Cisco -- closed in the green. The S&P 500 -- the broadest measure of Wall Street -- fell 2.4% and the Nasdaq Composite also closed down 2.6%.
All three indexes recorded a weekly loss.
Banks were among the worst performers following the results of the Federal Reserve's latest stress test.
Although America's financial institutions got a clean bill of health from the central bank, they will be required to further shore up their capital to protect themselves against losses and preserve their ability to lend to the country's struggling businesses.
Banks also won't be allowed to buy back shares in the third quarter of the year and shareholder dividends will be capped.
Economic data again pointed at some areas of concern in America's long road to recovery on Friday.
The Bureau of Economic Analysis reported that consumer spending rebounded in May, but Americans' income dropped sharply as government payouts declined. That's bad for the consumer spending-addicted US economy: If people don't have money to spend, recovering from the pandemic recession will take longer.
Meanwhile, the University of Michigan reported consumer sentiment slipped in the second half of June, in lockstep with a resurgence in Covid-19 cases in parts of the country.
The stock market had previously proven somewhat resilient against the climbing new infection rates in states like Texas and Florida, partly due to the Fed's commitment to loosen its monetary policy.
The big post-lockdown rally that sent stocks higher as the economy began to reopen might have priced the central bank stimulus in fully, suggested Fawad Razaqzada, market analyst at ThinkMarkets, so a renewed selloff over virus fears could result in a more profound downturn.
