(Reuters) – U.S. stocks slumped on Thursday with the Dow shedding over 5% and the index on track for its sharpest one-day decline since March 18, as investors fretted over a resurgence in coronavirus infections and a grim economic outlook from the Federal Reserve.
The S&P 500Â .DJIÂ and the Dow JonesÂ .DJIÂ were set to wipe off most of their gains made this month, and the tech-heavy NasdaqÂ .IXICÂ tumbled 3.9% as it came off four consecutive sessions of record highs.
New coronavirus cases rose slightly in the United States after five weeks of declines, only a part of which is due to higher testing, a Reuters analysis showed.
Wall Streetâ€™s fear gauge, the CBOE volatility index , jumped 8.4 points to 36.08, on track for its biggest daily point gain since March 16.
The easing of lockdowns and a massive stimulus program to help the economy bounce back quickly to pre-pandemic levels have been pivotal in helping the three main indexes recover about 40% from a deep, virus-induced selloff.
â€œThereâ€™s a possibility that new COVID-19 cases may reappear which could set the economy back at least for a period of time,â€ said Michael Sheldon, chief investment officer of RDM Financial Group in Westport, Connecticut.
â€œTodayâ€™s decline is a setback for the market and it could certainly be more choppy over the near term.â€
The S&P 500 and the Dow 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.
A Labor Department report on Thursday showed about 1.54 million people applied for state unemployment benefits for the week ended June 6, roughly in line with estimates.
â€œWeâ€™re actually going to have a W-shaped recovery,â€ said Chad Oviatt, director of investment management for Huntington Private Bank in Columbus, Ohio. â€œMarkets are dealing with the fact that we now have an elongated recovery period.â€
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