Stocks drop at the open on fears of a second coronavirus wave

North American stocks opened sharply lower on Thursday, June 11 with the Nasdaq falling after a four-day rally on fears of a second wave of coronavirus infections and a grim economic forecast from the Federal Reserve.

The Dow Jones Industrial Average fell 707.48 points, or 2.62 per cent, at the open to 26,282.51. The Nasdaq Composite dropped 229.11 points, or 2.29 per cent, to 9,791.24 at the opening bell. The S&P 500 was down 88.15 points, or 2.76 per cent, at 3,101.99 after market open.

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In Toronto, the S&P/TSX composite index was down 357.91 points to 15,343.00 at 9:50 am E.T.

The S&P 1500 airlines index tumbled 7.4 per cent, while Norwegian Cruise Line Holdings Ltd and Royal Caribbean Cruises Ltd slumped 12.6 per cent and 9.0 per cent, respectively.

Wall Street’s fear gauge, the CBOE volatility index, hit its highest level since May 15.

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“The market has been rallying because they’re looking to 2021 and saying we’re going to get past this and then things will sort of get back to normal,” said Sean O’Hara, president of Pacer ETF Distributors in Malvern, Pennsylvania.

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“One thing that really could change the trajectory here would be if we have a big bounce in a second wave. That’s the big fear.”

The easing of lockdowns and a massive stimulus program to help the economy bounce back quickly to pre-pandemic levels have been pivotal in the S&P 500 staging a stunning recovery from a deep, virus-induced selloff.

READ MORE: Dividend stocks have stumbled amid COVID-19 — What does that mean for investors?

The S&P 500 and the Dow Jones indexes ended lower on Wednesday after Fed Chair Jerome Powell acknowledged it could take years for the millions of people laid off due to COVID-19, to get back to work, even as he reiterated his promise to support the virus-hit economy.

“Chair (Jerome) Powell was pretty guarded and cautious and that’s spilling into market psychology today,” said Art Hogan, chief market strategist at National Securities in New York.

A Labor Department report showed about 1.54 million people applied for state unemployment benefits for the week ended June 6, roughly in line with estimates.

Boeing Co shed 7.8 per cent after its top supplier Spirit AeroSystems Holdings Inc announced a 21-day layoff for staff doing production and support work for Boeing’s 737 program. Spirit AeroSystems tumbled 8.2 per cent.

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Shares of U.S. banks, which tend to benefit in a higher rate environment, slipped 4.8 per cent, extending losses after Fed policymakers saw key overnight interest rates remaining near zero through at least 2022.

All S&P sectors were lower with energy, financials and real estate posting the steepest declines.

Online food delivery firm Grubhub Inc jumped 6% after Europe’s Just Eat Takeaway.com NV agreed to buy its U.S peer in an all-stock deal for $7.3 billion.

Declining issues outnumbered advancers for a 16.47-to-1 ratio on the NYSE and a 10.61-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and no new low, while the Nasdaq recorded nine new highs and four new lows.

— With a file from the Canadian Press