US STOCKS-S&P 500 tumbles on fears of virus resurgence in economic reopening

(For a live blog on the U.S. stock market, click LIVE/ or
type LIVE/ in a news window)
* Fauci comments on virus control worry investors
* BlackRock drops as top holder dumps stake
* GrubHub soars on report of takeover offer from Uber
* Indexes fall: Dow 1.89%, S&P 2.05%, Nasdaq 1.86%
*

(Updates closing prices)
By Sinéad Carew
New York, May 12 (Reuters) - The S&P 500 dropped 2% on
Tuesday as investors took profits following a warning from the
top U.S. infectious disease expert that premature moves to
reopen the nation's economy could lead to novel coronavirus
outbreaks and set back economic recovery.
The index suffered its first decline in four sessions as
investors weighed the potential for a second wave of virus
infections against hopes that easing of stay-at-home
restrictions could ignite a recovery in the U.S. economy, which
has been severely damaged by the virus.
Anthony Fauci, the director of the National Institute of
Allergy and Infectious Diseases, told Congress that the virus,
which has already killed 80,000 Americans, was not yet under
control and that there would not likely be a treatment or
vaccine in place by late August or early September. "There is a real risk that you will trigger an outbreak that
you may not be able to control and ... could even set you back
on the road to try to get economic recovery," Fauci said of
premature steps.
And reports of new clusters of coronavirus infections in
countries such as China, South Korea and Germany where lockdowns
had been lifted appear to have added to worries. Optimism about an economic recovery and massive stimulus
measures have helped the S&P 500 climb about 34% to Tuesday's
intraday high from the March 23 low of the pandemic-driven
selloff.
"It goes back to science versus the Federal Reserve. The
Federal Reserve has been supportive of the market ... What's
going to win here?," said Phil Blancato, chief executive of
Ladenburg Thalmann Asset Management in New York.
"From the science viewpoint if we open too quickly, we'll
just go back to where we were. But if we don't open at all, we
have this economic malaise."
With concerns about potential for declines, participants
like Dennis Dick, proprietary trader at Bright Trading LLC in
Las Vegas, were anxious to lock in their profits.
"People are very nervous about how the reopening is going to
go," he said.
Wall Street's three major averages closed around their
session lows. The Dow Jones Industrial Average .DJI fell
457.21 points, or 1.89%, to 23,764.78, the S&P 500 .SPX lost
60.2 points, or 2.05%, to 2,870.12 and the Nasdaq Composite
.IXIC dropped 189.79 points, or 2.06%, to 9,002.55.
The Cboe Volatility Index, known as Wall Street's fear
gauge, ended 5.47 points higher at 33.04. It was the biggest
one-day point gain for the VIX in more than three weeks.
Among the S&P's 11 major sectors, real estate .SPLRCR was
the biggest percentage decliner with a 4.3% drop.
Industrials .SPLRCI and financials .SPSY were the next
biggest laggards with respective declines of 2.8% and 2.7%.
Tuesday's data showed that U.S. consumer prices dropped by
the most since the Great Recession in April, due to a plunge in
demand for gasoline and services including airline travel as
people stayed home during the coronavirus crisis. But prices for food consumed at home rose 2.6% in the
largest advance since February 1974, leaving some investors
anxious about the prospect of stagflation, if consumers cannot
keep up with price increases for essentials.
"What happens if the cost of essential goods get more
expensive and you're not earning enough money. That could become
really problematic," said Ladenburg Thalmann's Blancato.
Helping to drag down the financial sector was a 7.8% drop in
BlackRock Inc BLK.N , after its top shareholder PNC Financial
Services Group Inc PNC.N said it planned to sell its entire
22% stake in the world's largest asset manager. Online food delivery company GrubHub Inc GRUB.N surged 29%
after a person familiar with the matter said Uber Technologies
Inc UBER.N was in advanced talks to buy the company in an
all-stock deal. Declining issues outnumbered advancing ones on the NYSE by a
2.91-to-1 ratio; on Nasdaq, a 2.65-to-1 ratio favored decliners.
The S&P 500 posted nine new 52-week highs and two new lows;
the Nasdaq Composite recorded 91 new highs and 42 new lows.
On U.S. exchanges 11.28 billion shares changed hands
compared with the 11.36 billion average for the last 20
sessions.