Stocks Drop on Coronavirus Uptick, Fading Stimulus Hopes
By Anna Hirtenstein
U.S. stocks dropped sharply Monday as coronavirus cases surged
in the U.S. and Europe, adding to worries about the economic
outlook after Congress and the White House failed to agree on a
much-anticipated fiscal stimulus deal.
Major indexes opened lower, and the declines accelerated as the
morning progressed. All 30 components of the Dow Jones Industrial
Average were lower, as were all 11 sectors of the S&P 500.
The Dow industrials fell 640 points, or 2.2%, the S&P 500
dropped 1.9% and the Nasdaq Composite fell 1.5%.
Among the biggest decliners were the travel and leisure stocks
that have come under the most pressure this year during the
pandemic. Royal Caribbean Group dropped 10%, United Airlines
Holdings fell 6% and Marriott International declined 5.1%.
The U.S. reported 60,789 new cases Sunday, down from recent
record-setting levels, but up from a week earlier. Scientists had
been expecting cooler weather to lead to a second wave of the
disease, but it is coming earlier than many had anticipated. That
is prompting fresh concerns about tighter lockdown restrictions and
the effect on the economy.
"It's a worrying picture for sure. You may have to account for
the possibility that by midwinter, there might be circuit breakers
implemented," including stringent short-term shutdowns, said David
Stubbs, head of investment strategy at J.P. Morgan Private Bank.
"But we always knew this recovery would be stop-start: We won't be
truly moving into the main part of a new cycle until the health
care issue itself is dealt with."
Investors are watching this week's talks in Congress for any
indication on advances in the negotiations for a fiscal stimulus
deal. House Speaker Nancy Pelosi told CNN on Sunday that she was
expecting more answers on Monday and that an agreement could be
reached this week among lawmakers. But Democrats and White House
officials are blaming each other for the lack of progress after the
two sides went into the weekend without a deal, dimming hopes for
an agreement before Nov. 3.
"We have doubt that any strong agreement will be found before
the election, we just have days to go," said Luc Filip, head of
private banking investments at SYZ Private Banking. "It's kind of a
game where you show that you want to find an agreement, but I'm not
sure of the real willingness behind it."
He has sold off longer-dated U.S. Treasurys, U.S. stocks and the
dollar ahead of the election, and instead bought Chinese equities
and exchange-traded funds.
"The Chinese economic momentum is really showing a lot of
strength and it's the only place in this world where you have this
dynamism," Mr. Filip said.
Oil prices slipped. U.S. crude oil futures fell 2.4% to $38.89 a
barrel. A cease-fire in Libya has led analysts to project the
country's output will reach 1 million barrels a day in the next
four weeks, up from about half a million a day, according to Bjarne
Schieldrop, chief commodities analyst at SEB. The rise in
coronavirus infections is also muting prospects for the economic
recovery and damping demand, he said.
"We have oil being hit from both sides of the equation. Libya
supply is seeing a rapid increase," Mr. Schieldrop said. "At the
same time, demand is being hit by a wave of new Covid-19 cases and
with new lockdowns."
The pan-continental Stoxx Europe 600 retreated 1%, led by a
decline in German stocks.
Coronavirus cases are accelerating in Europe. France reported
more than 52,000 new infections Sunday, a daily high. Italy is
trying to rein in the spread with new rules, such as the mandatory
closure of restaurants and bars at 6 p.m. Spain declared a state of
emergency, as it did in March.
Among European equities, business-software maker SAP plunged
nearly 20% after cutting its outlook for the year and reporting a
decline in quarterly sales and profit. The company said businesses
are being more cautious about spending and investment.
In Asia, most major equity benchmarks closed lower. China's
Shanghai Composite Index fell 0.8%. Markets in Hong Kong were
closed for a public holiday.
In bond markets, the yield on the benchmark 10-year U.S.
Treasury note declined to 0.810%, from 0.840% on Friday.
The WSJ Dollar Index, which measures the greenback against a
basket of currencies, added 0.3%.
Write to Anna Hirtenstein at email@example.com
(END) Dow Jones Newswires
October 26, 2020 11:28 ET (15:28 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.