U.S. stocks fell sharply on Tuesday, with stocks that would have benefited from the economic reboot performing the worst, as the market worried about the increase in cases of the new crown (Chinese Communist virus) and Germany‘s new Epidemic prevention measures foreshadowing the slow progress of the global economic reboot. In addition, investors are also concerned about the cost of infrastructure spending and the potential for the U.S. government to raise taxes to pay for President Biden‘s $1.9 trillion bailout plan.
U.S. stocks have been pulling up and down from flat during the session and fell rapidly 45 minutes before the close. The Standard & Poor’s 500 index was lower and the small-cap Russell 2000 index fell 3.6 percent. The airline index fell the most since October.
At the close of trading at 4:00 p.m. New York Time, the Dow Jones Industrial Average plunged 308.05 points, or 0.9 percent, to 32,423.15, while the S&P 500 fell 30.07 points, or 0.8 percent, to 3,910.52. The Nasdaq Composite Index was down 149.85 points, or 1.1%, at 13,227.70.
The CBOE Market Volatility Index jumped about 11 percent in a single day after touching its lowest level in 13 months. But this Wall Street panic indicator is still hovering near the low level of the new crown pneumonia epidemic.
Federal Reserve Board (Fed) Chairman Ball downplayed doubts that the economic recovery would trigger unnecessary Inflation, and the U.S. 10-year bond yield fell for the second day in a row to 1.637% from 1.682% on Monday.
Bauer and U.S. Treasury Secretary Yellen both said they expect a strong rebound in the economy this year after the launch of the vaccine, but they stressed that the U.S. recovery is far from complete. Bauer also said he does not expect the $1.9 trillion stimulus package to lead to a troubling rise in inflation, but he stressed that the Fed has the tools to cope with rising price pressures if necessary.
Rick Meckler, a partner at Cherry Lane Investments, said statements about the government’s infrastructure plan have unnerved investors worried that stock market prices are too high.
Oil prices slumped about 6% as markets worried that new outbreak control measures and slow vaccinations in Europe will slow demand, pushing energy stocks lower.
ViacomCBS plunged 9.1%. The media conglomerate said it will sell $2 billion in common stock and $1 billion in preferred stock.
Cruise stocks fell. Carnival plunged 7.8 percent and Royal Caribbean Cruises Ltd. sank 5.6 percent.
Shares of video game retailer GameStop fell 6.5% after the company reported Q4 earnings after hours and the company announced the departure of its chief customer officer, the latest sign of its massive transition to an e-commerce business.
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