US Stocks fall on profit booking after OECD adds risk of COVID-19

The US stock market finished session sharply lower on Tuesday, 07 July 2020, with the S&P 500 snapping its 5-day win streak, as investors withdrew profit off the table amid concerns about sharp jump in new coronavirus cases nationwide and as gloomy economic forecasts suggested a recovery will be uneven.

At closing bell, the Dow Jones Industrial Average dropped 396.85 points, or 1.51%, to 25,890.18. The S&P 500 index declined by 34.40 points, or 1.1%, to 3,145.32. The tech-heavy Nasdaq Composite Index fell 89.76 points, or 0.9%, to 10,343.89.

Stock investors took a breather due to nagging unease over the outlook for the global economy in the midst of rising U.S. coronavirus infections. Florida's greater Miami area became the latest U.S. coronavirus hot spot to roll back its reopening, while Texas registered an all-time high in the number of people hospitalized at any one moment with COVID-19 for an eighth straight day. Federal Reserve Bank of Atlanta President Raphael Bostic said the renewed spread of coronavirus may threaten the pace of the recovery as businesses and consumers put plans on hold.

The Organisation for Economic Co-operation and Development factored in the risk of a second wave of COVID-19 in its bleak economic forecasts, adding that countries need to move quick to extend unemployment benefits.In a new report, the OECD said the unemployment rate among its 37 member countries ticked down to 8.4% in May 2020, down from a decade-high 8.5% in April. The picture is bleaker in the United States, where the unemployment rate sits at 11.1% as of June. The OECD, which counts the U.S. as one of its member countries, expects the U.S. unemployment rate to remain high at 10.4% in the fourth quarter of 2020. The OECD report acknowledges the risks of a second wave and included a double-hit scenario in its economic forecasts. Under a single wave, the OECD forecasts U.S. real GDP growth of -7.3% in 2020 with a 4.1% rebound in 2021. But in a second wave, the OECD predicts U.S. real GDP growth of -8.5% in 2020 with a muted bounce-back of only 1.9% in 2021. For all OECD countries, the OECD expects a 7.5% contraction in real GDP for 2020 under a single-hit scenario but a 9.3% contraction for 2020 under a second wave.

Most of sectors declined, with bank stocks, whose performance is linked to the outlook for the economy, led losses. Airline and travel-related stocks, which were among the hardest hit during lockdowns, also fell.

Among Indian ADR, WNS Holdings dropped 2.19% to $54.48, Tata Motors shed 2.79% to $7.32, Vedanta fell 2.01% to $5.85, HDFC Bank shed 1.84% to $47.92, and Dr Reddys Labs was down 1.66% to $51.45, while INFOSYS rose 1.29% to $10.24, ICICI Bank added 1.23% to $9.91, and Wipro added 0.6% to $3.37.

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