KEY POINTS

  • Covid-19 cases surging in Texas, Florida, Arizona
  • Consumers spending rose sharply by 8.2% in May, after declines of 6.6% in March and 12.6% in April
  • May saw a 4.2% drop in personal income

U.S. stocks tumbled on Friday over worries about ever rising covid-19 cases in many U.S. states.

The Dow Jones Industrial Average dropped 730.05 points to 25,015.55, while the S&P 500 fell 74.71 points to 3,009.05 and the Nasdaq Composite Index tumbled 259.78 points to 9,757.22.

For the week, the Dow dropped 3.3%.

Friday’s volume on the New York Stock Exchange totaled 4.62 billion shares with 552 issues advancing, 35 setting new highs, and 2,457 declining, with 13 stocks setting new lows .

Active movers were led by Vaxart Inc. (VXRT), Ideanomics Inc. (IDEX) and Luckin Coffee Inc. (LK).

Gov. Greg Abbott said Friday that Texas will scale back some of its reopening plans as coronavirus cases and hospitalizations rise. “At this time, it is clear that the rise in cases is largely driven by certain types of activities, including Texans congregating in bars,” Abbott said.

Florida said it will suspend “on premises consumption” of alcohol in bars after reporting almost 9,000 new virus cases in the state.  Arizona has also seen a surge in covid-19 infections.

“Coronavirus cases are spiking and reopenings are being delayed, which at a minimum will impact earnings,” said Tom Essaye, founder of The Sevens Report. “The resurgence in coronavirus cases is raising concerns that the rebound may be short-lived as voluntary or potentially more government mandated economic shutdowns are becoming increasingly likely.”

Consumers spending rose sharply by 8.2% in May, after declines of 6.6% in March and 12.6% in April. But May saw a 4.2% drop in personal income.

Late Thursday the Federal Reserve released its annual stress tests of major banks which revealed the covid-19 pandemic could push some banks to minimum capital levels. As such, the Fed suggested banks should suspend share buyback plans and keep dividend payments capped at current levels.

“While I expect banks will continue to manage their capital actions and liquidity risk prudently, and in support of the real economy, there is material uncertainty about the trajectory for the economic recovery,” said Fed Vice Chair Randall Quarles.

Separately, Fed Governor Lael Brainard said she supported a blanket suspension of all dividends by banks to “create a level playing field and allow all banks to preserve capital without suffering a competitive disadvantage relative to their peers.”

“These [banks] are effectively nationalized,” said David Ellison, a portfolio manager at Hennessy Funds. “It sounds like buybacks aren’t going to come back [for] a long time, and the dividends are going to be subject to what the Fed believes the economy looks like.”

Andrew Smith, chief investment strategist, Delos Capital Advisors, in Dallas, Texas, said of the stock market: “We believe investors should prepare for continued volatility as the stock market digests the continued increase in COVID-19 infection rates and the impressive rally from the March 23 market lows.”

Overnight in Asia, the Shanghai Composite index was closed for holidays, while and Hong Kong’s Hang Seng exchange fell 0.93%; and Japan’s Nikkei-225 gained 1.13%.

In Europe markets finished mixed, as Britain’s FTSE-100 edged up 0.2%, while France’s CAC-40 edged down 0.18% and Germany’s DAX slipped 0.73%.

Crude oil futures fell 1.37% at $38.19 per barrel, Brent crude dropped 0.71% at $40.64. Gold futures rose 0.83%.

The euro edged up 0.1% at $1.1229 while the pound sterling slipped 0.64% at $1.2339.

The yield on the 10-year Treasury dropped 5.64% to 0.636% while yield on the 30-year Treasury fell 3.24% to 1.372%.