By Joe Wallace
U.S. stocks edged down Thursday as a rise in coronavirus infections in more than a dozen U.S. states prompted concerns that restrictions on business and social activity may need to be reimposed.
The S&P 500 fell 0.5%, suggesting the benchmark index could pull back for the second day in a row. The S&P 500 logged its first decline in four trading days on Wednesday, extending a stretch of jittery trading over the past week. The Dow Jones Industrial Average fell 200 points, or 0.8%. The Nasdaq Composite declined 0.1%.
This week, Texas, Arizona and North Carolina reported record daily coronavirus-related hospitalizations. More than a dozen states have seen confirmed cases go up in the past week at a pace faster than the previous seven days, according to a Wall Street Journal analysis of Johns Hopkins data. Investors are nervous that increasing cases will undermine efforts to restore the economy by relaxing lockdowns.
"In the U.S., we're still in the part of wave one where it's uncertain if it's contained or not," said Cliff Tan, East Asian head of global markets research at MUFG Bank. "If the U.S. really can't get things under control, that could be a pretty major shock."
Further spread in the virus could stall a nascent recovery in U.S. consumer spending, a major driver of the world economy, Mr. Tan added.
The number of Americans filing for unemployment benefits edged down last week, the Labor Department said, though applications remained historically high at 1.5 million. New jobless claims have eased as states allowed businesses to reopen and employers recalled workers, adding to evidence that the U.S. economy is rebounding after a downturn in April.
Still, investors' confidence that the global economy can quickly bounce back has ebbed in recent days. A fresh outbreak of coronavirus in Beijing has prompted Chinese authorities to cancel hundreds of flights in and out of the capital city, contributing to caution among investors.
"Markets have slipped back into the February, March mind-set," said Paul Donovan, chief economist at UBS Global Wealth Management.
Investors are reasoning that the uptick in cases will lead to new shelter-in-place orders or prompt people to rein in spending, according to Mr. Donovan. However, statistics such as requests for driving directions in Arizona and Texas suggest consumers are responding to the virus with less caution than they did three months ago, he added.
Ahead of the opening bell in New York, shares in Carnival Corp. fell more than 7% after the cruise-operator reported a $4.4 billion net loss in the second quarter.
In a sign of renewed caution among investors, shares in companies that are highly sensitive to economic growth, such as banks, have paused in recent sessions.
"That's because there's still plenty of uncertainty about the outlook for global growth," said Candice Bangsund, a portfolio manager at Fiera Capital. Tensions between the U.S. and China also have the potential to weigh on stocks, Ms. Bangsund said.
A meeting between Secretary of State Mike Pompeo and his Chinese counterpart in Hawaii -- part of an effort by Washington and Beijing to manage a relationship that has deteriorated in recent weeks -- laid bare their deep differences. The two diplomats didn't say when they might meet again, although the Chinese asserted the talks were constructive.
International stocks also pulled back. The Stoxx Europe 600 dropped 0.9%, led lower by shares in banks, and Hong Kong's Hang Seng Index closed down 0.1%.
Among individual European stocks, shares in Wirecard crashed 53% after the German company again delayed publication of its 2019 annual report. The troubled payments company's auditor said it had been deceived over evidence of EUR1.9 billion ($2.1 billion) in cash balances.
The British pound was down fell 0.6% against the dollar after the Bank of England expanded its bond-buying program by GBP100 billion ($125 billion). Policy makers kept interest rates on hold at 0.1% and also said they are ready to take further actions to support the economy.
On a busy day for central banks in Europe, Norway's krone rose against the dollar after the Norges Bank cut its key rate to zero in a surprise move. The Swiss franc slipped after the Swiss National Bank kept interest rates on hold at minus 0.75%.
Write to Joe Wallace at Joe.Wallace@wsj.com