Market Watch: Stock Market Slips in Response to Global Uncertainty
As the U.S. approaches the deceleration phase of COVID-19, the stock market is volatile, and the global economy remains unstable. Averages are fluctuating based on critical reports this week, including rising unemployment numbers, China and U.S. trade tensions, low manufacturing reports, and dramatic profit decreases in crucial sectors. Economic data is flooding the world with fear and uncertainty, showing signs of deflation in the recovery phase of COVID-19. A rebound is underway from the grim few months of the global shutdown; however, the damage incurred may not disappear promptly. Large sectors may require dramatic adjustments to rebuild their businesses, which will not favor workers.
"We are in the midst of an economic downturn without modern precedent," Jerome Powell, chairman of the Federal Reserve System, stated at the "Fed Listens" event.
In just nine weeks, the U.S. lost over 38 million jobs, topping 2.4 million last week. Americans wait for Washington's decision on whether to extend benefits given from the previous stimulus package that expires at the end of July. These decisions have caused mass debate in Washington while the numbers tilted gains on Wall Street. On Thursday, the Dow Jones Industrial Average closed down -.41%, the S&P 500 closed -.78% , and NASDAQ declined -.97%. Federal Reserve Chairman Jerome Powell expressed concerns about the dramatic damage in his remarks last week.
"It has already erased the job gains of the past decade and has inflicted acute pain across the country," he said. A large concern is the inability to rebuild after the damage that has been done. Many businesses are unable to withstand the many months of stay at home government orders and may not ultimately reopen.
While Americans scramble to survive the massive burden the virus has placed on financial stability, international tensions that existed before the virus raise further concern for the domestic prosperity of the U.S. China and the U.S. had pre-existing tensions that headed with the global flow of wealth. Recent coronavirus accusations have more dramatically impacted the two largest economies. President Trump has formally placed blame on Beijing for not accurately communicating the severity of the virus in the early phases of the outbreak. In retaliation, Beijing suggested the U.S. may be the core source of the pandemic.
Amid COVID-19 debates, lawmakers are also evaluating the possibility of passing a bill that may prevent Chinese companies from listing shares on the U.S. stock exchange. Congress reasoned for the statement using Lukin Coffee, a company that suffered from Chinese regulation resulting in false sales figures. In just a few months, the company's shares plunged from $50 to $3, which could have been prevented with the bill provisions underway. Tensions threaten the well-being of the global market, making it in neither party's interest to avoid negotiation. Stocks slipped slightly on Thursday in response to the discussions in both parties debating the issues and stimulus' attached.
As the world begins to slowly return to a degree of normalcy, the economy’s state is fragile and unprecedented. International disparagement between China and the U.S. has impacted trade alliances, leading to further concern for the coming months. Unemployment numbers are piling up, hindering businesses from generating enough profits to sustain a large payroll. Governments must act in the interest of global prosperity and put aside conflicting interests to move past the repercussions promptly. The economy is reopening slowly to prevent an overall foreclosure of vulnerable businesses in the U.S. However, there are still a vast number of cases nationally, and citizens' health continues to be a priority.
"We've got to find the right balance as we move forward between protecting people and keeping people healthy,” David Solomon, chief executive of Goldman Sachs said in a Financial Times report. “Being compassionate, but also being pragmatic about the fact that we need an economic activity also to keep people healthy."