What happened

Downbeat news from the Federal Reserve and Johns Hopkins University shook confidence in stocks Thursday. Industrial metals companies are looking especially hard-hit, with shares of copper producer Freeport-McMoRan (NYSE:FCX) off 11.6% in 1 p.m. EDT trading, aluminum giant Alcoa (NYSE:AA) down 14.7%, and U.S. Steel (NYSE:X) suffering worst of all -- down 16%.

So what's all the fuss about?

Molten steel pouring in a foundry

The stock market is melting down today. Even for metals companies, that's not good news. Image source: Getty Images.

So what

First things first: To allay any concerns you might have about these three companies in particular, there's actually no bad news to report on any of them today. To the contrary, just this morning analysts at Deutsche Bank upgraded shares of Freeport-McMoRan citing "continued strength" in copper pricing, according to TheFly.com. And it's only been two days since U.S. Steel received positive analyst commentary of its own, with GLJ Research upgrading the shares to hold and predicting a 15% to 20% near-term profit from the stock.

Draw back a bit, however, and the macroeconomic picture looks a little bit shakier.

Johns Hopkins University is reporting that the number of coronavirus infections in the U.S. just passed 2 million, and more than 113,000 people have died from COVID-19. All U.S. states have begun the process of reopening by now, but coronavirus cases are on the rise in at least 20 states surveyed, and it's starting to look like reopening the economy is going to de facto mean unleashing a second wave of coronavirus.  

On the other hand, if we don't reopen the economy -- or worse, if we enter into a second Great Lockdown -- then there's basically zero chance that demand for industrial metals like copper, aluminum, and steel is going to revive anytime soon.

Now what

Against this backdrop, the Federal Reserve released a prediction that U.S. GDP will contract by 6.5% this year, with unemployment stuck above 9%. A new report from the Organization for Economic Cooperation and Development, which came out yesterday, makes even those numbers look optimistic: OECD figures suggest GDP could contract 8.5%, with unemployment as high as 16.9%.

We're in a recession already, true, but things could still get worse from here. The stock market's recent rally didn't seem to have priced that risk in before -- but today, it is.