U.S. and global markets slide as tensions rise with China
Stocks dropped sharply to open the week after several states began loosening coronavirus lockdown mandates and as tensions grew between the United States and China over the handling of the outbreak.
Secretary of State Mike Pompeo said Sunday there was "enormous evidence" the virus had come from a lab in China, though that pronouncement conflicts with emerging scientific consensus about the disease's origin. President Donald Trump is said to be intent on punishing Beijing over the spread of the coronavirus, which has now infected more than 1 million Americans, and he has threatened to impose new tariffs.
"Punishing China is definitely where the president's head is at right now," one senior adviser told The Washington Post last week.
The Dow Jones industrial average dropped 240 points, or 1.1%, at the open. The Standard & Poor's 500 and Nasdaq also trended lower.
Global markets sank. Japan's Nikkei index fell 2.8%, the Hang Sang in Hong Kong plunged 4.1% and the German DAX gave back 3.5%.
Airline stocks tumbled premarket after Warren Buffett announced that Berkshire Hathaway had sold all its airline holdings because of the outbreak. United Airlines plunged 10%, American Airlines skid more than 11.4% and Southwest slid 6.5%.
"The world has changed for the airlines, and I don't know how it's changed and I hope it corrects itself in a reasonably prompt way," Buffett said at Berkshire Hathaway's annual investors' meeting. "I don't know if Americans have now changed their habits or will change their habits because of the extended period."
April marked Wall Street's best month in 33 years, with the S&P 500 surging 12.7%. Market analysts are closely watching consumer behavior during this first week of May as some states begin slowly opening their economies, many against the recommendations of public health experts. Twenty-four states are partially reopening this week as stay-at-home orders expire and governors allow certain retail establishments, including restaurants, to resume service.
Trump has backed protesters in other states who have swarmed state capitals - often armed with rifles - with calls to "LIBERATE" those states.
Meanwhile the consequences of steep losses from the past quarter have come into sharper relief. The GDP fell 4.8% even as the economic shutdown lasted only half the quarter. More than 30 million Americans are out of work and the unemployment rate has reached levels comparable to the Great Depression.
Preppy fashion retailer J. Crew was the latest corporate victim to fall. It filed for Chapter 11 bankruptcy protection early Monday and will convert $1.65 billion worth of debt into equity.
"If the economy fell this hard in the first quarter, with less than a month of pandemic lockdown for most states," said Chris Rupkey of MUFG Bank, "don't ask how far it will crater in the second quarter because it is going to be a complete disaster."
