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Why Berkshire Hathaway, Mastercard, and UPS Stocks Plunged Today

By Rich Smith – Updated Jun 11, 2020 at 6:38PM

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Three more economic bellwethers just got their collective bells rung.

What happened

Stock markets took a big turn for the worse on Thursday, with the tech-heavy Nasdaq falling 5.3%, the Dow tumbling 6.9%, and the S&P 500 falling somewhere in between, closing the day at a 5.9% loss.

The carnage was extensive, and even blue chip names like delivery giant United Parcel Service (UPS 0.96%), credit card kingpin Mastercard (MA 2.16%), and Warren Buffett's holding company Berkshire Hathaway (BRK.A 1.68%) (BRK.B 2.17%) couldn't escape unscathed. Indeed, as businesses so huge that their fortunes mirror those of the entire economy ("economic bellwethers," as the saying goes), they suffered declines in line with those of the stock market as a whole: UPS down 5.8%, and Mastercard and Berkshire Hathaway down 7% each.

Big red arrow over a stock chart

Image source: Getty Images.

So what

 These three economic giants fell because investors got a whole lot more nervous about the economy as a whole today. Reports out of Johns Hopkins University confirmed a marked rise in coronavirus infections in more than 20 U.S. states that have begun permitting stores, restaurants, and factories to resume operations after months shutdowns to slow the spread of the coronavirus. And the Federal Reserve issued a prediction today that 2020 GDP will contract by 6.5%, with unemployment rates in excess of 9% through year-end.

Now what

If coronavirus infections continue to spread, it's possible that our present recession will be prolonged by a second wave of COVID-19, necessitating a revival of stay-at-home orders and business closures, and postponing the economic recovery into 2021.

In that regard, the report that the Organization for Economic Cooperation and Development issued Wednesday predicted that a second wave of coronavirus infections could increase the economic damage by a third (pushing GDP contraction up past 8.5% this year) and make the unemployment rate almost double what the Fed forecast: 16.9%.

Things are still bad, and they could get worse. Investors who poured back into the stock market, fueling a 44% rise in the S&P from late March through the close of trading last week, appeared to have forgotten that. Today's sharp stock sell-off may serve as just the wake-up call they needed.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Mastercard and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$272.80 (2.17%) $5.78
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$290.48 (2.16%) $6.14
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$163.09 (0.96%) $1.55
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$413,300.00 (1.68%) $6,830.00

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

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