Wall Street sinks as 10-week boom comes crashing down on ‘second wave’ fears

Linda J. Dodson

“Equity markets have come under huge pressure as there are fears about a second wave of Covid-19 infections. US states like Texas, California and Arizona reported there has been an increase in new infections, which is likely to be a result of the loosening of lockdown restrictions,” said David Madden at CMC Markets.

“In recent weeks global equities have enjoyed a rally on the back of the news that economies were reopening, but now dealers are worried the unwinding of the restrictions might trigger a fresh round of cases. As far as the markets are concerned it is a case of two steps forward and one step backwards.”

Caution from the Federal Reserve also tempered markets’ enthusiasm. The prospect of rock-bottom interest rates for the foreseeable future means it is harder for banks to turn strong profits, hitting financial stocks.

“Quite apart from leaving rates in deep freeze for the next two years (at least), the clear message has been that the world’s most-powerful central bank is committed to repairing the damage to the US economy wrought by Covid-19, regardless of what markets do,” said Chris Beauchamp at IG.

“Investors underestimate the Fed at their peril. But perhaps the lack of any fresh action meant that a short-term drop in stocks was all but  guaranteed.”

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