As of 1 p.m. today the Standard & Poor’s 500 stock index was down 2.8% and the Dow Jones Industrial Average was lower by 2.29%. The tech-heavy NASDAQn Composite, a recent market bulwark, dropped 1.80% and the Russell 2000 small cap index resumed its position as market lagged with a decline of 3.42%. The iShares MSCI Emerging Markets ETF (EEM) fell 1.38%.
Gold retreated slightly sliding 0.21% to $1778.30 an ounce. The slip, on recent patterns, is a result of some traders and investors selling gold to meet margin calls in the equity market.
The yield on the 10-year Treasury retreated slightly to 0.68%, a drop of 3 basis points, as investors and traders bid up the bond on a move to safety. The yield on the 2-year Treasury climbed to 0.21% from 0.18% on Friday, June 19.
Why the moves? And the heightened worry today?
The International Monetary Fund warned today that growth in the global economy will on fall even more than predicted in April. Today’s update to the IMF’s World Economic Outlook projects that there global economy will contract by 4.9% the year. The April report put the contraction at 3%. In 2021 the IMF projected positive growth of 5.4%.
The U.S. economy, the IMF projected, will shrink by 8% this year before expanding by 4.5% in 2021. The EuroZone economy will in contract by 10.2% in 2020 and expand by 6% in 2021. The Chinese economy will manage to expand by 1% in 2020 and by 8.2% in 2021.
Which would be bad enough except that the rising number of coronavirus cases and hospitalizations across a broad stretch of southern and western states has raised fears that dome recently re-opening state economies will have to reduce their re-opening moves or pace.
California reported 5,019 new cases, its biggest daily jump, for a total of more than 183,000. The state also hit a record 3,700 hospitalizations. Arizona also broke its daily case record, adding nearly 3,600, according to tallies released Tuesday, bringing the total to 58,179. The state also reported 42 deaths, raising the toll to 1,384. In Florida new cases reached 23,397, the highest ever. Deaths reached 3,237, an increase of 2%, the most on a percentage basis since June 5. Cumulative hospitalizations in Florida rose by 199, or 1.5%, to 13,318. On a rolling seven day-basis, they reached 1,112, the highest level since May 25. The new rate of people testing positive for the first time climbed to 10.9% for Monday, from 7.7% on Sunday. Texas recorded more than 5,000 new cases in the past 24 hours, a record daily toll. Texas Governor Greg Abbott said during a TV interview that despite the surge, he has no intention of reimposing an economic lockdown. (Politics 101 teaches us that when an official says there is no intention of doing something “at this time,” it means that the action in question is certainly under discussion.)
Th problem in Texas and Arizona and other states is that the rate of new hospitalizations is eating away at the remaining supply of hospital beds. In Texas, statewide hospitalizations surged by more than 10% to 4,092. The 381 new admissions were the biggest daily increase since the start of the coronavirus pandemic emerged. In Harris County–home to Houston–intensive-case capacity will be exhausted in 11 days, based on the two-week average expansion rates, the Harris County judge’s office reports. Surge beds–newly created backup care capacity–will be full in 38 days.
Clearly something needs to be done to tame the surge in hospitalizations. Right now most states–Washington State and Oregon are notable exceptions–are continuing to push ahead with plans to re-open more of their economies.
Wall Street is increasingly skeptical of that plan of action–or inaction if you prefer.