By Jem Bartholomew and Dawn Lim
U.S. stocks fell Friday, with the Dow Jones Industrial Average
on track to close out its worst week and month since March in the
final lap of the presidential race.
Volatility reigned in the week before the Nov. 3 contest.
Investors have been spooked by a record high in coronavirus
infections in the U.S., fresh lockdowns in Europe that threaten
economic growth and a mixed bag of earnings report from big
technology companies.
"Markets are concerned that we are replaying February and
March," said Chris Beauchamp, chief market analyst at IG Group. "It
probably still isn't in that category yet, but it is heading in the
wrong direction."
The Dow dropped 1.3% on Friday. The blue-chip index has shed
more than 7% this week, putting it on track for its worst weekly
performance since the height of the pandemic-induced market
tumult.
The S&P 500 fell 1.8%, pulled down by declines in all 11
sectors. The benchmark index is now up just 0.3% in 2020. The
Nasdaq Composite dropped 2.8% following a sharp selloff in big tech
stocks.
All three indexes suffered losses of more than 2% for October,
their second consecutive month of declines. After a remarkable run
since late March, stocks peaked in early September--and tumbled
initially on worries the market had run too far, too fast.
Although economic data and corporate earnings have improved
lately, many investors fear the impact of another round of
lockdowns in the event the number of coronavirus cases continues to
increase.
U.S. households boosted spending in September, according to the
Commerce Department. But even as consumers increased spending since
the summer, economists expressed concerns that many remain left out
of a recovery.
"It would be no surprise that the beneficiaries of this strong
spending are the high-income bracket households," said S&P
Global's U.S. Chief Economist Beth Ann Bovino. "If a large number
of people are unable to participate in the expansion, the economy
suffers."
Earnings reports and guidance from technology companies weighed
heavily on stocks Friday.
"Big tech stocks were priced for perfection," said Michael
Mullaney, director of global markets research at Boston Partners.
"Any disappointment would be ripe for lower prices. They're getting
slammed today."
Twitter plunged 20% after posting its slowest user growth in
years and warning that uncertainty around the U.S. election could
compress ad spending.
Apple shares dropped 5.8% after quarterly iPhone sales fell from
a year earlier. That, combined with a delay in the launch of the
company's new smartphone, led to iPhone revenue falling more than
analysts had expected.
Shares of Facebook, Amazon.com, Tesla, Microsoft and Netflix all
declined more than 1%.
"The big tech earnings were not that bad, but markets did not
respond positively, so that does suggest a deeper sense of
negativity in the market," said Seema Shah, chief strategist at
Principal Global Investors.
In contrast, shares of Google's parent Alphabet rose 4.7%. The
company reported third-quarter profit that outstripped analyst
estimates.
Among other earnings-related moves, shares of Exxon Mobil fell
2.1% after the energy giant reported its third consecutive
quarterly loss as the pandemic continued to sap oil demand.
Small stocks, which have outperformed their larger peers this
month, also came under pressure. The Russell 2000 dropped 1.5% on
Friday, cutting its gains for October to 1.5%.
The prospect of a contested election continues to cast a shadow
over the market, adding to the uncertainty over what the rest of
the year will bring.
"There's unprecedented uncertainty around who will be elected
and when we will know," said Adam Grealish, director of investing
at Betterment. "We're using our election systems in ways we've
never before."
Some investors have swooped in to take advantage of bargain
prices. Ariel Investments has been adding to positions in
industrials and media stocks in recent weeks, said Charles
Bobrinskoy, vice chairman at the value investment management firm.
Ariel sees a major chasm between how smaller value stocks and the
broader markets are priced.
The yield on the 10-year Treasury note rose to 0.872% Friday,
from 0.834% Thursday.
Overseas, the Stoxx Europe 600 edged up 0.2% after wavering
between gains and losses for much of the session.
Europe is once again at the epicenter of the coronavirus
pandemic, with the continent now recording more and faster-rising
deaths than the U.S. in an abrupt reversal of fortunes. Fresh
lockdowns by governments in response to the rising infection
levels, led by France and Germany, are weighing on markets.
The rise in infections across parts of Europe is stretching the
capacity of hospitals in the worst-hit cities in France, Belgium,
Italy and elsewhere. On a per capita basis, deaths from Covid-19 in
Europe are now rapidly approaching U.S. levels, after running
significantly below since May.
"The sentiment is just so whipsawed at the moment," said Andy
Maynard, managing director of equities sales trading at China
Renaissance Securities, citing the uncertainty surrounding U.S.
elections and the resurgence of virus infections.
While the election and U.S. stimulus negotiations were a focus
for investors, "the bigger risk is actually on global economic
recovery and what's happening to Covid, especially looking at
Europe right now," he added.
In Asia, major markets ended the day sharply lower. South
Korea's Kospi index dropped 2.6%. China's Shanghai Composite Index
fell 1.5%, Hong Kong's Hang Seng declined 1.9% and Japan's Nikkei
225 shed 1.5%.
--Xie Yu and Joanne Chiu contributed to this article.
Write to Dawn Lim at dawn.lim@wsj.com
(END) Dow Jones Newswires
October 30, 2020 15:45 ET (19:45 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.