Wall Street stocks tumbled Wednesday following a trove of weak economic data and bank earnings reports that pointed to a severe US economic slowdown.
The Dow Jones Industrial Average dropped 1.9 percent to 23,504.35. The broad-based S&P 500 shed 2.2 percent to 2,783.36, while the tech-rich Nasdaq Composite Index dropped 1.4 percent to 8,393.18.
The losses were a rupture in the market’s rise over the last three weeks as improving coronavirus data from New York and other hotspots and unprecedented government stimulus have boosted sentiment. Economic reports released Wednesday showed US retail sales plunged in March while industrial production in the same month suffered its steepest drop since 1946.
Other reports pointed to weak homebuilder sentiment and manufacturing conditions, while a Federal Reserve report said US economic activity “contracted sharply.” “The economic numbers are coming in even worse than most economists expected,” said economist Joel Naroff in a note that questioned the stock market’s recent strength.
“Investors have been exuberant the last three weeks,” he said, and yet, “First quarter earnings are just starting to come in and for most firms they are gruesome.”
Major banks such as Wells Fargo, Bank of America and Citigroup all fell five percent or more as financial giants announced billions of dollars in reserves in anticipation of loan defaults. The selloff extended to regional banks including PNC Financial and US Bancorp, both of which also fell sharply after boosting reserves for potential bad loans.
An exception was Goldman Sachs, which announced more than $900 million in reserves, but also reported strength in trading and some other divisions amid the market turmoil in March. Their shares gained 0.2 percent.
