You are here: Home » International » News » Markets
Business Standard

Wall Street falls as Powell warns of extended period of weak growth

It will take some time for the US economy to get back to where it was, Powell said in a webcast, and called for more fiscal stimulus

Topics
Wall street drops | Jerome Powell

Reuters 

wall street
Wall Street's fear gauge rose for the second day to hit a one-week high

Wall Street's main indexes fell on Wednesday after Federal Reserve Chairman warned of an extended period of weak growth and stagnant incomes due to the coronavirus pandemic.

It will take some time for the US economy to get back to where it was, Powell said in a webcast, and called for more fiscal stimulus.

"Powell's doing the right thing by warning people that this is not just going to be a V-shaped recovery," said Sam Hendel, president and co-portfolio manager of New York-based Levin Easterly Partners.

"I think the market may be overstating the ease of returning back to normal."

However, Powell made it clear that the Fed won't push interest rates below zero, as traders had been increasingly betting.

ALSO READ: AstraZeneca says data from Covid-19 vaccine's phase-1 trials to be out soon

The three main US stock indexes have climbed about 30 per cent from their March lows as investors bet on a pickup in business activity after various states eased virus-induced lockdowns that have caused mass layoffs and disrupted supply chains.

However, the rally paused this week on fears of a second wave of Covid-19 infections following a spike in new cases in Germany, South Korea and China and a warning from a top US health expert.

At 11:31 a.m. ET, the Dow Jones Industrial Average was down 307.23 points, or 1.29 per cent, at 23,457.55, the S&P 500 was down 26.48 points, or 0.92 per cent, at 2,843.64. The Nasdaq Composite was down 48.44 points, or 0.54 per cent, at 8,954.12.

Energy dropped 2.5 per cent, the steepest percentage losses among the 11 major S&P sectors. Interest rate-sensitive banks stocks shed 4 per cent, tracking a slight drop in US Treasury yields.

Wall Street's fear gauge rose for the second day to hit a one-week high.

ALSO READ: Brands, sponsors play the game of uncertainty as Covid-19 halts all sports

"Volatility is likely to persist because there's a lot of uncertainty on how this virus plays out," said Brian Levitt, Global Market Strategist for Invesco.

Royal Caribbean Cruises launched a $3.3 billion bond offering, pledging 28 of its ships as collateral and forecast heavy losses for the first quarter. Its shares fell 6.8 per cent.

Declining issues outnumbered advancers for a 4.22-to-1 ratio on the NYSE and for a 3.32-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 10 new lows, while the Nasdaq recorded 28 new highs and 71 new lows.

First Published: Wed, May 13 2020. 23:53 IST
RECOMMENDED FOR YOU