Stock futures extend declines as pandemic concerns continue

Stock futures kicked off the overnight session lower Tuesday evening, extending declines from the regular trading day.

Earlier, the three major U.S. equity indices erased intraday gains and ended with their largest one-day declines in seven sessions, as market participants grew wary of some states’ reopening processes, and considered other major metropolitan areas’ extended stay in place orders. Los Angeles County will likely remain under distancing orders through July, officials said Tuesday. New York City residents are likely to remain under stay in place orders through at least June, Mayor Bill De Blasio said earlier this week.

But other states and counties are already in the midst of – or will soon begin – a phased reopening process. During a congressional testimony Tuesday, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned of consequences that “could be serious” if parts of the country open before the pandemic is adequately contained.

“If you think that we have it completely under control, we don’t,” Fauci said. “And if you look at the dynamics of the outbreak, we are seeing a diminution of hospitalizations and infections in some places, such as in New York City, which has plateaued and starting to come down, New Orleans. But in other parts of the country, you are seeing spikes.”

But as economists, analysts and market participants have acknowledged, extended shutdowns that have helped bring down new case growth for the virus have simultaneously come at the expense of economic and business activity. A number of Federal Reserve officials who delivered public remarks on Tuesday issued more cautious commentary around the coronavirus’s near- and long-term impacts on the U.S. economy and financial markets.

Cleveland Fed President Loretta Mester, a voter in this year’s Federal Open Market Committee (FOMC), said in prepared remarks she expected unemployment to hit or top 20% domestically, and for second-quarter annualized GDP growth to be negative by as much as 40%, before a gradual economic recovery kicks off in the second half of the year.

And during a webcast Tuesday, St. Louis Fed President James Bullard said widespread shelter in place orders could not go on indefinitely, saying, “You’ll get too many business failures and you’ll really do lasting damage.”

On Wednesday, Fed Chair Jerome Powell is set speak about the current economic situation via a webcast hosted by the Peterson Institute for International Economics at 9 a.m. ET.

—