Market is underestimating how weak the economy will remain after reopening: Pro

CNBC's Kelly Evans discusses markets and investing strategies as parts of the U.S. economy begin to reopen amid the coronavirus pandemic, with Doug Ramsey of the Leuthold Group and Brian Weinstein of Morgan Stanley Investment Management.

Stocks slumped on Friday as shares of Amazon led the major indexes lower on the month’s first day of trading. Concerns over a potential trade skirmish between China and the U.S. also dented sentiment.

The Dow Jones Industrial Average fell 617 points, or 2.5%, as Dow Inc and Exxon Mobil each fell more than 7%. The S&P 500 dropped 2.8% with consumer staples and communications stocks leading the broad market index down. The Nasdaq Composite closed 3.2% lower as a host of big-tech names fell.

Tech titan Amazon led declining stocks on the week’s final day of trading with shares down 7.6% after announcing plans to spend all its second-quarter profits on its coronavirus response. The e-commerce behemoth also posted a first-quarter profit that missed analyst expectations.

Apple reported quarterly earnings that topped analyst expectations, but its revenue growth remained flat on a year-over-year basis. It also did not offer guidance for the quarter ending in June amid uncertainty over the coronavirus outbreak. The tech giant’s stock dropped 1.6%.

Facebook and Alphabet also dropped 1.2% each while Netflix declined by 1.1%.

Both Apple and Amazon are among the companies that led the S&P 500′s comeback from the late-March lows and were two of the best performers in April. Amazon rallied nearly 27% in April while Apple jumped 15.3%.

The possibility of another skirmish between China and the U.S. also pressured stocks after White House economic advisor Larry Kudlow said the Chinese will be held accountable for the coronavirus.

“There’s no question about that. How, when, where and why — I’m going to leave that up to the president,” Kudlow told CNBC’s “Squawk on the Street.”

Those comments came after President Donald Trump told reporters he suspects the virus came from a lab in China, but did not offer evidence to support that claim. Tensions between China and the U.S. had been kept in check ever since both sides reached a phase one trade deal in late January.

“This has been brewing over the last couple of days ... so there’s fear of another trade war brewing in the middle off all this,” said James Ragan, director of wealth management research at D.A. Davidson, noting Trump has mentioned the possibility of using tariffs on China. “The last thing you want to do in a recession is raising taxes.”

“There’s no policy that’s been crafted yet, but I think the market is reacting to that a bit,” said Ragan.

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