Dow Dives 1,800 Points On Worries Of 2nd Coronavirus Wave
RACHEL MARTIN, HOST:
This has been the kind of week that people who own stocks have come to dread. Prices plunged across the board on Thursday. The Dow Jones Industrial Average fell by 1,800 points. That is almost 7% of its value. NPR's Jim Zarroli is watching the markets and joins us now. Hi, Jim.
JIM ZARROLI, BYLINE: Good morning.
MARTIN: Not a good day, Jim. Not a good day. Describe...
ZARROLI: (Laughter) No, it was brutal.
MARTIN: Describe what happened.
ZARROLI: Yeah. I mean, if you're a stock investor, it was just terrible. It was one of the worst drops in the Dow's history. Seven percent decline is not something you see in normal times. I mean, it kind of takes us back to mid-March when the lockdowns were starting and the market was falling by huge amounts every day. I think a lot of investors thought they had put that kind of volatility behind them. Now we see it isn't really over. Bank of America was down 10%. Boeing lost 16%. About the only stock that gained a bit was Zoom, which, of course, we all, you know, use for virtual meetings now.
MARTIN: Right, which has its own controversy swirling around it. So what would explain a sudden drop like this, Jim?
ZARROLI: I think there were two reasons. The most important thing that happened was we got bad news about the virus. We've seen a spike in cases in places like Texas, Florida, Arizona. These were states that had reopened a bit earlier than everybody else. People are wondering if there are - you know, if there are lessons there for states that are reopening now, hard-hit states like New York and New Jersey. I think people are wondering if we're going to see a second wave of cases. And, you know - and that - another lockdown would just be devastating for the economy.
MARTIN: So you said that there were two main reasons. That's the first. What's the second?
ZARROLI: I think the second reason grew out of the Federal Reserve's meeting this week. The Fed kept interest rates at zero, which was good. But it also issued a pretty discouraging statement about the economy. It said the coronavirus would weigh heavily on economic activity and employment. Then the Fed chair, Jerome Powell, said it's going to take some time before things return to normal. He said, by the end of the year, unemployment will be about 9.3%. That's lower than it is now. But it's still very high. I mean, that would be...
ZARROLI: ...Almost where we were at the height of the Great Recession.
MARTIN: So the relationship between President Trump and the Fed chair, Jerome Powell, has not been great. The president has castigated him publicly. Did he have any reaction to his comments?
ZARROLI: Well, won't surprise you to know there was a tweet. He said the Fed has been wrong a lot before. And he said it's his opinion that it's wrong again. He said we're going to have a very good third quarter and a great fourth quarter. And we will have one of our best years ever in 2021. I mean, of course, he's been trying to, you know, talk up the economy, be positive. It's an election year. And if the economy stays as bad as it is, it's going to be a lot harder for President Trump to win reelection.
MARTIN: So Jim, what is your takeaway from what's happening right now?
ZARROLI: Yeah. I think investors are taking a breather. And we've had this really weird dichotomy until now. You know, a lot of companies have suspended their guidance to investors. In other words, they're saying, things are so crazy and uncertain now, we're not even going to try to say where we think we'll be in a few months. But stock market investors have been rushing in and buying shares of these very same companies anyway.
I mean, they see Congress pumping trillions of dollars into the economy. They see the Fed taking unprecedented action, lending money to everybody. So investors have been really optimistic. But I think, you know, yesterday's big rout suggests that people are reassessing, at least for now.
MARTIN: NPR's Jim Zarroli. Thank you.
ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.