DOW Crashed Because of IMF Statement
(Fri, 26 Jun 2020). The Dow and broader U.S. stock market are in freefall Wednesday, as investors react to a slew of negative headlines from politics to the economy. The stock market is in the midst of another bruising correction on Tuesday.
The Dow Jones Industrial Average plunged by as much as 843 points Wednesday. The losses follow a highly volatile pre-market session as investors reacted to President Trump’s shockingly low re-election odds as per the New York Times. All 30 of the Dow’s blue-chip companies record losses, with Boeing leading the declines. The Dow and broader U.S. stock market underwent another wave of selling on Wednesday, as investors reacted to a grim forecast about the global economy. President Trump’s re-election odds are also in focus after a New York Times poll put Joe Biden lightyears ahead of the incumbent.
Dow 30 Plunge; S&P 500, Nasdaq Follow
All of Wall Street’s major indexes printed heavy losses Wednesday, reflecting a volatile pre-market for Dow futures. The Dow Jones Industrial Average plunged by as much as 843 points. Year-to-date, the blue-chip index is down over 11%. All 30 Dow index members recorded losses, with Boeing (NYSE:BA) leading the declines. Raytheon Technologies (NYSE:RTX), ExxonMobil (NYSE:XOM), and Dow (NYSE:DOW) also declined sharply.
The broad S&P 500 Index of large-cap stocks plunged 2.9%, with all 11 primary sectors recording declines. Energy shouldered the most substantial losses; as a sector, it fell 5.8%. Financials, industrials, and healthcare companies also posted significant declines. Meanwhile, the technology-focused Nasdaq Composite Index declined by 2.6%.
The CBOE Volatility Index, commonly known as the VIX, spiked 14.1% to 35.80. Anything above 20 represents higher than usual volatility. Typically, the CBOE VIX moves in the opposite direction of stocks. When the VIX rises, stocks fall, and vice-versa. Volatility approached record highs in March as stocks plunged into a bear market. Although the gauge is still higher than average, it’s much lower than where it was a few months ago.
IMF Downgrades Global Economic Outlook
Losses were magnified by a damning report on the global economy from the International Monetary Fund (IMF). The lending institution has downgraded its outlook on global economic growth, referring to the pandemic as a “crisis like no other.” The IMF’s revised forecast shows global GDP contracting 4.9% in 2020. In April, the Fund projected a 3% contraction.
The U.S. economy is forecast to fall 8% this year, while Eurozone GDP is expected to contract 10.2%. China’s economic growth is pegged at a modest 1% this year as India, Latin America, and developing Europe all contract.
A sudden resurgence in virus hot spots across the United States has cast doubts about the likelihood of a quick recovery. Brazil, Russia, and India have also become epicenters of the novel disease. Low-income households are more prone to economic hardship due to the pandemic.
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