U.S. stocks tumbled Wednesday as pockets of coronavirus infections emerged in several states, intensifying fears of officials having to reinstate lockdown measures around the country.
The Dow Jones Industrial Average fell 683 points, or 2.6%. The S&P 500 declined 2.5%, and the Nasdaq Composite lost 2.1%.
New coronavirus cases have jumped in several states, with Arizona, Texas and California reporting daily records for infections Tuesday. Texas Gov. Greg Abbott and Florida Gov. Ron DeSantis said they would step up enforcement of social-distancing guidelines. California Gov. Gavin Newsom said earlier this week that the surge in cases could force the state to implement stricter measures on businesses and social gatherings once again.
The reports have raised concerns that a nascent economic recovery may be in jeopardy. Much of what investors have been betting on is that swaths of the U.S. will be able to resume normal activity while avoiding a major resurgence in infections.
“If this does get worse and more endemic, they will have to lock down some of these states again,” said Charles Hepworth, an investment director at GAM Holding.
Shares of companies whose businesses have been particularly hard hit by the pandemic led the market’s declines Wednesday.
Carnival shares lost 9.1% and Norwegian Cruise Line fell 10% after S&P downgraded the former company’s credit rating, saying the cruise industry faced a long period of weak demand.
Bank stocks also tumbled, with Bank of America falling 3.4% and Goldman Sachs losing 2.7%.
Home builder stocks also took a hit Wednesday, with D.R. Horton shedding 5%. Existing home-sales have plunged since rising to a 13-year high in February, although some analysts have been betting on low interest-rates helping draw buyers back in over the coming months.
Elsewhere, European stocks dropped, with the Stoxx Europe 600 falling 2.8%. Germany’s Health Minister Jens Spahn said the coronavirus remained a risk after the western state of North-Rhine Westphalia on Tuesday locked down two municipalities following an outbreak at a meatpacking plant.
Also weighing on stocks, the U.S. said it was considering imposing tariffs on $3.1 billion worth of products from the U.K., France, Germany and Spain. The warning, which targets products including olives and malt beer, came in a review of the long-running dispute over government subsidies to aircraft manufacturers.
“The tensions between the Europeans and the U.S. have been bubbling under the surface for quite some time,” said Jane Foley, head of foreign-exchange strategy at Rabobank. “Anything that suggests there is going to be tension on trade is bad for the global economy.”
Investors’ concerns about the rise in infections have in recent weeks had been tempered by optimism about stimulus measures from central banks and major governments. That helped stocks around the world bounce higher for much of the month.
But money managers are having to grapple with the possibility that the economic recovery will be slower and more uneven than they had expected, especially if countries are unable to tamp down a rise in coronavirus infections.
Economists at the International Monetary Fund said Wednesday that the global economy will contract 4.9% in 2020, worse than its previous forecast of a 3% contraction.
“The steep decline in activity comes with a catastrophic hit to the global labor market,” the IMF said in an update to its flagship World Economic Outlook report.
In Asia, Hong Kong’s Hang Seng Index slipped 0.5%, while India’s major gauge shed 1.6%. South Korea’s Kospi gained 1.4% after North Korea suspended military plans directed against Seoul.
“They’re struggling to keep this totally under control,” said Paul Jackson, head of asset allocation at research at Invesco, pointing to Germany and South Korea. “What’s been more troubling in recent weeks is that globally, the daily deaths have flattened and are now on an upward trend.”
The St. Luke's Medical Center hospital in Phoenix. New coronavirus cases have jumped in several states, with Arizona, Texas and California reporting daily records of infections Tuesday.
Photo: Ross D. Franklin/Associated PressWrite to Joe Wallace at Joe.Wallace@wsj.com and Akane Otani at akane.otani@wsj.com
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