Please ensure Javascript is enabled for purposes of website accessibility

Why Marriott International, Eldorado Resorts, and Carnival Stocks All Fell Today

By Rich Smith – Jun 10, 2020 at 2:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Fear of a coronavirus second wave rocked the market.

What happened

It's been a crazy day in the stock market Wednesday, with the S&P 500 inching only modestly lower but shares of stocks tied to the travel and vacation industry falling off a cliff.

At 12:30 p.m. EDT today, shares of hotelier Marriott International (MAR 4.80%) are off 3% after being down nearly 7% earlier in the day. Casino operator Eldorado Resorts (ERI) is sliding 5.1%, and cruise line operator Carnival (CUK 14.50%) (CCL 13.29%) is down a staggering 7.8%.

3-D rendering of scary looking viruses on a red background

Image source: Getty Images.

So what

If you have to guess, blame the coronavirus. On Friday, the S&P 500 finally got back all it had lost since 2020 began, while the tech-heavy Nasdaq actually set an all-time high. And yet, despite the positive news out of Wall Street, the fact remains that the coronavirus is still out there. No vaccine has been discovered, nor do we have a proven cure once a person is infected.

In short, we're not safe yet. And amid this unsafe situation, we just heard Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, warn that the pandemic isn't over yet. Worse, the Organization for Economic Cooperation and Development (OECD) just issued a warning about a potential second wave of coronavirus cases.  

Couching her prognosis in the form of two scenarios it considers equally likely, OECD chief economist Laurence Boone says the "single hit" wave of COVID-19 cases that we're currently undergoing will cut U.S. GDP by more than 7% this year. The good news is that this should give rise to better than 4% growth in GDP in 2021. (The bad news is that it might not.)

In the event of a "double hit" (a second wave of COVID-19 emerging probably during the fall flu season), U.S. GDP could fall as much as 8.5% this year, and next year's recovery would be cut in half to less than 2% growth. Unemployment rates under that second wave could soar as high as 16.9% for this year, and remain above 10% through most of next year.  

Now what

More than just the unemployment effects on consumer income and spending (which would not be good for travel and vacation-related businesses), there's the psychological effect to consider.

When COVID-19 first hit us, the U.S. stock market suffered its fastest, sharpest contraction in history, falling 35% in less than a month's time. Fears of a second wave of coronavirus causing a similar meltdown, with that first meltdown still fresh in our minds, could become a self-fulfilling prophecy, driving down stock prices even more than they would ordinarily fall in response to the economic contraction.

This is the dire prospect that the OECD has just outlined for us, and even if it only puts the chances of it happening at 50-50, that's more than enough reason to reintroduce fear into the stock market today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival and Marriott International. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marriott International, Inc. Stock Quote
Marriott International, Inc.
$147.56 (4.80%) $6.76
Carnival Corporation Stock Quote
Carnival Corporation
$6.87 (14.50%) $0.87
Eldorado Resorts, Inc. Stock Quote
Eldorado Resorts, Inc.
Carnival Corporation Stock Quote
Carnival Corporation
$7.76 (13.29%) $0.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.