By Anna Isaac and Ben Eisen
The Dow Jones Industrial Average dropped more than 700 points,
falling in tandem with oil and gold prices and sparking worry among
some investors of further turbulence ahead.
Monday's losses were broad. All 11 sectors of the S&P 500
dropped, as did 29 of the 30 Dow components. Economically sensitive
sectors like materials and industrials led the declines, both
falling more than 4%.
Meanwhile, U.S. oil prices tumbled 5%, and gold, a traditional
haven, fell 2.5%. The simultaneous declines across various asset
classes spurred anxiety for some investors and traders who fear a
repeat of March's market turmoil.
The Dow dropped 2.7%, while the S&P 500 fell 2%. The
technology-laden Nasdaq Composite lost 1%.
The declines extend the stock market's retreat into a fourth
consecutive week, snapping a summer rally that had propelled the
major indexes near record levels.
Sentiment has soured in September, with investors saying they
are growing uneasy about the outlook for the U.S. economy as the
prospect of an additional fiscal-stimulus package looks
increasingly remote ahead of a heated U.S. election campaign
season.
"The odds of us getting a stimulus package before the election
are probably as close to zero as we are going to get," said Jim
Tierney, chief investment officer for concentrated U.S. growth at
AllianceBernstein. "The stocks that needed stimulus are getting hit
hard today."
Shares of airlines, retailers and energy companies--which have
been battered this year during the pandemic--were among the
market's biggest losers. Delta Air Lines dropped 8.2%, while Kohl's
fell 7.2% and Halliburton declined 9.6%.
A closely watched barometer of expected turbulence in U.S.
stocks, the Cboe Volatility Index, jumped Monday to its highest
level in weeks. Some investors said they expect the volatility to
continue.
"I don't think we are going to see the lows that we saw in
March. I do believe that overall the market has gotten a little
ahead of itself," said Diane Jaffee, a senior portfolio manager for
relative value strategies at TCW.
The S&P 500 was off more than 7% from its Sept. 2 record
through Friday's close, while the Nasdaq Composite was down more
than 10%. The Dow has yet to reclaim its prepandemic high and was
about 6% below its February record.
Some investors sought safety in government bonds, pulling the
yield on the benchmark 10-year Treasury note down to 0.666% from
0.694% Friday. Bond prices and yields move in opposite
directions.
Investors said they were also unnerved by continuing tensions
between the U.S. and China and the threat of renewed lockdowns in
many places because of higher coronavirus infections.
Over the weekend, China's Ministry of Commerce laid out
penalties for companies and individuals it deems to be "unreliable
entities," including potential restrictions on staffing and
investment in China, curbs on imports and exports, and fines.
The list is aimed at identifying foreign entities and
individuals that could harm Chinese interests. No names have thus
far been disclosed. The development is likely to add another stress
point to the already strained relations between the U.S. and China,
as it signals Beijing may step up retaliatory measures, investors
said.
"There's the broader macro risk that this might be China
starting to become more combative in its use of sanctions," said
Edward Park, deputy chief investment officer at Brooks Macdonald.
"That wasn't really on the markets' radar."
Bank stocks were also down broadly, with Wells Fargo off by more
than 5%. Shares of JPMorgan Chase, the largest U.S. bank by assets,
fell 4.4% after news articles detailed "suspicious activity
reports" filed by it and other major banks to U.S. authorities.
Shares of HSBC Holdings, also named in the news reports, hit a
25-year low in Hong Kong.
Elsewhere, shares of Oracle rose 1.3% after President Trump said
he has agreed in concept to a deal under which Chinese-owned
video-sharing app TikTok will partner with Oracle and Walmart to
become a U.S.-based company. The negotiations have stirred debate
over national security and the future of the internet. The Commerce
Department said it would delay a ban on U.S. downloads and updates
for the TikTok app that was set to take effect at 11:59 p.m.
Sunday.
Shares of Illumina dropped 7%. The maker of machines that
sequence genes will pay $7.1 billion in cash and stock for a
developer of a long-sought blood test that promises to detect canc
er early, people familiar with the matter said.
Nikola's stock plummeted 18% as founder and Executive Chairman
Trevor Milton will step down from the electric-truck startup amid
allegations from a short seller that he and the company had made
false statements to investors.
Overseas, the pan-continental Stoxx Europe 600 fell 3.2%.
Coronavirus cases have been rising across major European economies,
leading to speculation that governments will be forced to implement
new lockdowns that will curtail business and social activity across
the region.
"The worry is definitely that we're going to see restrictions on
economies and that's going to have a big negative impact going
forward," said Altaf Kassam, head of investment strategy for State
Street Global Advisors in Europe. "There's the noise from
politicians across Europe on the threat of further lockdown, that
we've reached a tipping point on the rate of infections."
In Asia, most major stock benchmarks declined. Hong Kong's Hang
Seng Index retreated 2.1%, while China's Shanghai Composite ticked
down 0.6%.
Analysts said the drop in oil prices was triggered by signals
that Libya could renew its supply of oil to the global market at a
time when demand for oil has dropped. Gold, meanwhile, pulled back
after a recent run higher.
Write to Anna Isaac at anna.isaac@wsj.com and Ben Eisen at
ben.eisen@wsj.com
(END) Dow Jones Newswires
September 21, 2020 14:13 ET (18:13 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.