Wall Street stocks stumbled on Tuesday, with indices closing in the red as the enthusiasm for a recovering US economy was overtaken by fears of a resurgence in COVID-19 infections.
Wall Street indices went up on Monday after bond yields dropped as investors grew comfortable that out-of-control inflation wasn’t imminent, but sentiment reversed on Tuesday amid fears that the pandemic was still raging and on the up in the United States.
At the close, the benchmark Dow Jones Industrial Average was 0.9% lower at 32,423.15.
The broad-based S&P 500 lost 0.8% to finish at 3,910.52, while the tech-rich Nasdaq Composite Index fell 1.1% to end at 13,227.70.
Markets also watched testimony in Congress from Treasury Secretary Janet Yellen, who signaled President Joe Biden may propose raising the corporate tax rate to 28% as he pushes expensive stimulus proposals including an overhaul of the nation’s infrastructure.
Speaking at the same hearing, Federal Reserve Chair Jerome Powell again downplayed fears of a spike in inflation as the economy heals, which traders worry could cause the central bank to raise rates from their zero level sooner than expected.
JJ Kinahan of TD Ameritrade warned that even as markets remain hopeful for a return to normalcy as more people get vaccinated against COVID-19, the economy isn’t out of the woods yet.
“The week began with more worries in Europe, where vaccination progress is lagging and some countries like Germany are shutting down. On Monday, concern popped up about a rise in US cases as new variants make their way through various states,” he said in a note.
Among individual stocks, Dow member Caterpillar saw a drop of 3.4%. Airlines sold off amid the resurgent virus fears, with United Airlines closing 6.8% lower and American Airlines losing 6.6%.
Cruise line Carnival dropped 7.8%.