The sharp pullback on Wall Street came as the latest earnings and economic news reminded investors of the devastating economic impact of the coronavirus pandemic. Wednesday's economic lowlight was the Commerce Department report showing U.S. retail sales plummeted 8.7% in March after falling by a revised 0.4 percent in February, as the engine of the U.S. economy gets locked away amid widespread stay-at-home orders to slow the spread of the virus.
A separate report from the New York Federal Reserve showed New York manufacturing activity contracted at the fastest rate on record in the month of April. The New York Fed said its general business conditions index plummeted to a negative 78.2 in April from a negative 21.5 in March, with a negative reading indicating a contraction in regional manufacturing activity.
Energy stocks took the sharpest losses as oil prices touched another 18-year low after the International Energy Agency said on Wednesday that demand for oil around the world will fall this year by a record amount amid widespread lockdowns. Benchmark U.S. crude touched its lowest price since 2002 before recovering slightly to $19.87 a barrel, down 24 cents from a day earlier. Brent crude fell $1.91, or 6.5%, to $27.69 a barrel.
Financial stocks were also among the market's biggest losers after financial giants Bank of America (BAC), Goldman Sachs (GS) and Citigroup (C) all reported sharply lower first quarter earnings. The steep drop in earnings comes as the major banks set aside billions of dollars to prepare for a flood of defaults on loans due to the coronavirus-induced economic shutdown.
ECONOMIC NEWS: Fed's Beige Book Reports Sharp Contraction In Economic Activity And Business Contacts Expect Condition To Worsen-- The Fed's Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, noted the hardest hit industries included leisure and hospitality and retail due to social distancing measures and mandated closures. With the pandemic affecting firms in many sectors, the Fed noted employment declined in all districts, steeply in many cases. The jobs cuts were most severe in the retail and leisure and hospitality sectors, although many districts said sharp job cuts were widespread.
US economic activity contracted sharply and abruptly across all regions as a result of the COVID-19 pandemic, the Federal Reserve's Beige Book said on Wednesday. Looking ahead, the central bank said the near-term outlook was for even more job cuts in the coming months. The Beige Book also said the general direction of price inflation was down for both selling prices and non-labor input prices, as districts reported either slowing price growth, flat prices, or modest to moderate declines in prices on balance. The economic outlook was described as highly uncertain among business contacts in all districts, with most expecting conditions to worsen in the next several months.
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