Stock Market Slumps Just After The S&P 500 Index, Nasdaq Hit Record Highs
ARI SHAPIRO, HOST:
Investors in the stock market got a little case of the jitters today. The Dow Jones Industrial Average plunged more than 500 points this morning before partially recovering. The Dow ended the day off about 260 points. This after both the S&P 500 index and the Nasdaq hit record highs just yesterday. Fresh concerns about the coronavirus and a possible drag on the economic turnaround seem to be why the up and down. NPR's Scott Horsley joins us now. Hey, Scott.
SCOTT HORSLEY, BYLINE: Good to be with you, Ari.
SHAPIRO: How bad was the sell-off today?
HORSLEY: This was a noticeable gust, but it wasn't a full-blown tropical storm. Even at its worst, when the Dow was down more than 500 points, we're talking about a loss of less than 1.5%. And keep in mind, even after today's loss, the Dow is still up more than 12% for the year. It's up more than - up almost 90% from where it was last spring when the pandemic first hit. The other indexes you mentioned, the S&P and the Nasdaq, they've had even stronger performance for this year and a bigger bounce from their pandemic lows.
SHAPIRO: So give us a sense of what it was that spooked investors today.
HORSLEY: In a word, COVID. The drop on Wall Street followed a sell-off overnight in Asia, where South Korea is wrestling with a jump in coronavirus infections. And of course there was the high-profile announcement out of Japan that the Tokyo Olympic Games, set to begin later this month, will take place under a pandemic state of emergency. So that means no spectators for Olympic events in Tokyo proper. That move was not exactly a surprise, but it once again highlights the fact that the pandemic and its economic fallout are not over, even with the progress the U.S. has made in getting close to half the population fully vaccinated, including nearly 60% of adults and almost 80% of seniors.
SHAPIRO: The stock market doesn't always track with the broader economy, but investigators are certainly alert to what's happening on Main Street, so what are they seeing there?
HORSLEY: The U.S. economy is still growing at a rapid pace, though maybe not quite so fast as people were projecting a little while ago. Surveys released over the last week showed just a little bit of a downshift in both the manufacturing and the much larger services side of the economy. Both are still growing but not quite as fast. And that's partly because the challenges businesses are facing in getting the people and the parts they need to supply their customers.
Yesterday, the forecasting firm IHS Markit lowered its forecast for U.S. economic growth this year to 6.6%. That's down from 7.4% it was projecting. But that's kind of like turning the oven down from 450 to 425. We're still talking about a pretty hot economy. In fact, that would be the fastest economic growth since 1984.
SHAPIRO: Are there other factors we haven't talked about that might be influencing the stock market or the broader economy?
HORSLEY: Well, it's really all about COVID. You know, while the overall vaccination rate in this country is pretty good, it is very uneven. People in Vermont, for example, are twice as likely to be fully vaccinated as people in Alabama or Mississippi. And the people who are not vaccinated are still vulnerable, especially with that highly contagious Delta variant now circulating widely. That means the businesses where those people work and the businesses where they spend money are also potentially vulnerable.
You know, not so long ago, the market was also worried about inflation. It does appear those fears have subsided, at least for the time being. Investors seem to be going along with the Federal Reserve's argument that the sharp run-up in prices we've been seeing of late is likely to be temporary. We will get another check on what's happening with prices early next week. That's when the Labor Department puts out its next report on the consumer price index.
SHAPIRO: That's NPR's Scott Horsley. Thank you.
HORSLEY: You're welcome.
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