Futures drop on fears of second virus wave, bleak economic view

By Reuters On Jun 11, 2020

Traders wear masks as they work on the floor of the New York Stock Exchange in response to the outbreak of the coronavirus disease (COVID19) in the Manhattan borough of New York, U.S., May 27, 2020. REUTERS/Lucas Jackson

By Medha Singh and Devik Jain

(Reuters) – U.S. stock futures fell sharply on Thursday on jitters over a second wave of coronavirus infections and a grim forecast for the economy from the Federal Reserve.

Shares of airlines, cruise operators and casinos slumped as a Reuters analysis showed new cases rose in the United States after five weeks of declines.

United Airlines Holdings Inc (O:UAL), American Airlines (O:AAL), Norwegian Cruise Line Holdings Ltd (N:NCLH), Royal Caribbean Cruises Ltd (N:RCL) and Wynn Resorts (O:WYNN) slumped between 9% and 13% in premarket trading.

Wall Street’s fear gauge, the CBOE volatility index (VIX), rose above 30 points for the first time since June 1.

“The market has been rallying because they’re looking to 2021 and saying we’re going to get past this and then things will get sort of back to normal,” said Sean O’Hara, president of Pacer ETF Distributors in Malvern, Pennsylvania.

“One thing that really could change the trajectory here would be if we have a big bounce in a second wave. That’s the big fear.”

The easing of lockdowns and a massive stimulus program to help the economy bounce back quickly to pre-pandemic levels have been pivotal in the S&P 500 (SPX) staging a stunning recovery from a deep, virus-induced selloff.

The S&P 500 (SPX) and the Dow Jones (DJI) indexes ended lower on 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 for years.

A Labor Department report showed about 1.54 million people applied for state unemployment benefits for the week ended June 6, roughly in line with estimates.

Boeing Co (N:BA) shed 9.3% after its top supplier Spirit AeroSystems Holdings Inc (N:SPR) announced a 21-day layoff for staff doing production and support work for Boeing’s 737 program. Spirit AeroSystems tumbled 13.2%.

At 8:32 a.m. ET, Dow e-minis <1YMcv1> were down 834 points, or 3.09%. S&P 500 e-minis were down 79.25 points, or 2.49% and Nasdaq 100 e-minis were down 158.75 points, or 1.57%.

Shares of banks, which tend to benefit in a higher rate environment, slipped on Thursday as Fed policymakers saw the key overnight interest rates remaining near zero through at least 2022.

Bank of America Corp (N:BAC), Citigroup Inc (N:C) and JPMorgan Chase & Co (N:JPM) fell between 3.8% and 6%.

Online food delivery firm Grubhub Inc (N:GRUB) rose 10% after Europe’s Just Eat Takeaway.com NV (AS:TKWY) agreed to buy its U.S peer in an all-stock deal for $7.3 billion. The deal, if completed, would create the world’s largest food delivery company outside China.