Negative news from the Federal Reserve and Johns Hopkins University shook confidence in stocks of all stripes Thursday. And worries that America might not actually be able to reopen for business without consequences sent retail stocks American Eagle Outfitters (NYSE:AEO), Foot Locker (NYSE:FL), and Under Armour (NYSE:UA) (NYSE:UAA) into a tailspin.
As of 1:15 p.m. EDT today, American Eagle stock is down 6.5%, Foot Locker 8.1%, and Under Armour 8.3%.
And as recently as just a few hours ago, all three of these stocks had racked up 10% losses. So if you sold in the morning, you're worse off than if you had held until now.
There was no company-specific news weighing on any of these three stocks. This morning, Under Armour CEO Patrik Frisk told CNBC that his company has found a surprise hit product in Under Armour's face mask designed to make it easier for athletes to breathe during exercise, while protecting themselves and those around them from the coronavirus. According to Frisk, the masks sold out less than an hour after hitting shelves, and the company is hard at work making more.
About the same time as that news, it was reported that investment bank R.W. Baird had just endorsed Foot Locker stock as a near-term Fresh Pick that is enjoying a "sharp recovery."
And rounding out the list, just last week American Eagle stock got an endorsement from another analyst, at RBC Capital, who nearly doubled his price target on the stock.
But with all 50 states having at least partly reopened their economies, Johns Hopkins University is reporting a spike in new coronavirus infections in more than 20 states, the potential beginning of a second COVID-19 wave.
Will a resurgence of coronavirus necessitate a second Great Lockdown? Already, the effects of the first nationwide lockdown have the Federal Reserve predicting a 6.5% contraction in GDP this year, and unemployment rates of more than 9% through year-end.
A second lockdown, with stay-at-home orders, business and school closings, and the whole ball of wax, would make those numbers look even worse. Customers who've gradually begun returning to stores such as American Eagle and Foot Locker, or buying shirts and shoes from Under Armour, could be forced to hunker back down and put their wallets back into their pockets.
Investors today are clearly responding to this risk. But in response to their response, Treasury Secretary Steven Mnuchin told CNBC that "we can't shut down the economy again" because it would create more damage than the economy could sustain. Rather, said Mnuchin, the government intends to increase lending to businesses, get more money from Congress, and get people back to work.
So it sounds like a second Great Lockdown isn't something investors need to worry about. Whether we should worry even more about how bad COVID-19 could get in the absence of a lockdown, however, remains to be seen.