Stock markets sell off sharply as COVID-19 fears come roaring back
TSX has now fallen for three days in a row
Stock markets slumped on Thursday in their worst sell-off since markets crashed in March, while safe-haven assets like gold rose after the U.S. central bank cast doubt on hopes for a V-shaped recovery from the coronavirus pandemic.
The Dow Jones Industrial Average lost 1,861 points, or almost seven per cent, as investors digested the reality that the number of new coronavirus cases is once again rising in the United States, after five weeks of declines.
In Toronto, the S&P/TSX Composite Index lost 650 points, or more than four per cent. Losers outnumbered winners on the Toronto Stock Exchange's main index by almost 10 to one.
Colin Cieszynski, chief market strategist at SIA Wealth Management in Toronto, called the sell-off an "overdue correction."
"We've gone streaming up from the March lows with barely any pause," he said in an interview with CBC News. "Things may have come back a little too far too fast."
European stock markets were all down by about four per cent.
Just about every sector was in the red with financial, energy and material sectors posting the biggest declines.
The price of oil lost about 10 per cent, down $3.26 to settle at $36.34.
Wall Street's fear gauge, the CBOE volatility index, rose to 32 points, its highest level since May 15.
The easing of lockdowns and a massive stimulus program to help the economy bounce back quickly to pre-pandemic levels have been pivotal in helping the three main indexes recover about 40 per cent from a deep, virus-induced sell-off.
"The quick, V-shaped recovery market bulls have been banking on is far from a done deal, that there may be significant bumps and setbacks along the way and that any economic rebound we do get could be uneven," Cieszynski said.
"We're actually going to have a W-shaped recovery," said Chad Oviatt, director of investment management for Huntington Private Bank in Columbus, Ohio. "Markets are dealing with the fact that we now have an elongated recovery period."
The Canadian dollar lost more than a cent, changing hands at 73.43 cents US when stock markets closed Thursday.
The sell off started slowly Wednesday after Fed Chair Jerome Powell acknowledged it could take years for the millions of people laid off due to COVID-19 to get back to work, even as he reiterated his promise to support the virus-hit economy. But the sell off quickened on Thursday.
A Labour Department report showed about 1.54 million people applied for state unemployment benefits for the week ended June 6, roughly in line with estimates. While better than expected, that's still millions more people still losing their jobs, almost three months after the pandemic first hit in North America.
Shares in all five of Canada's biggest banks were lower, as were shares in Canadian oil companies Suncor, Husky and Imperial Oil.
With files from Reuters