By Will Horner
U.S. stocks fell in early trading Wednesday, as rising
coronavirus infections shook investors' confidence in the global
economic recovery and sent them toward the safety of Treasurys and
The S&P 500 dropped 1.8%, suggesting the broad index will
retreat for its third consecutive session. The benchmark has
slipped more than 5% from its record closing level in early
September. The Dow industrials lost 570 points, while the Nasdaq
Composite retreated 1.7%.
The selling was broad based and appeared to favor the safest
assets, especially short-term government bonds and the U.S. dollar.
Along with stocks, oil and emerging market currencies tumbled. Even
gold, considered a haven in stormy markets, was nearly 2%
Markets slid lower this week on a raft of uncertainties.
Worsening coronavirus case numbers may make more stringent
restrictions imperative across the U.S. and Europe, potentially
dealing a setback to the fragile economic recovery. New U.S. cases
climbed back above 70,000 as states across the country continued to
report high levels of fresh infections.
"A month ago, the narrative in the market was very much that
lockdowns would be limited and targeted, and so would have a
smaller impact on the economy," said Hugh Gimber, global market
strategist at J.P. Morgan Asset Management. "But now, what we are
seeing is broader concerns that lockdowns might be wider and have a
much wider impact."
The U.S. reported more than 73,200 new cases Tuesday, the second
daily increase in a row, according to data compiled by Johns
Investors also remain leery about the U.S. election, and whether
delays in counting mail-in ballots may lead to uncertainty in the
days after the Nov. 3 election.
Hopes have also faded that talks between the White House and
Democrats would produce agreement over a fresh package of stimulus
measures before the election, propping up the economic
"When you hit these record case numbers it grabs people's
attention," said Jeff Mills, chief investment officer at Bryn Mawr
Trust. "And when you have that combined with a breakdown in
stimulus talks it combines into this negative catalyst."
Another batch of corporate earnings reports were also being
scrutinized, and Ford and Visa are set to report just after the
General Electric shares were up 6.3% in premarket trading after
it surprised analysts with a third-quarter profit. Juniper Networks
also saw its shares rise 2.6% offhours after it reported earnings
that matched analysts' expectations. Automatic Data Processing
shares jumped over 7% after quarterly profits rose
Microsoft's stock was down 2.4% in offhours trading despite the
company saying that sales had jumped thanks to surging demand for
its videogames and cloud-computing services amid the pandemic.
Investors' expectations are too high, Mr. Mills said, and may
lead to stocks taking a beating.
"When companies miss or even just meet expectations, you are
seeing negative reactions in the stocks: that tells me valuations
are quite optimistic," said Mr. Mills. "Earnings expectations are
quite high, and if companies underperform, I am not sure the market
will react to that well."
Investors were also looking to pharmaceutical companies for
positive news on coronavirus vaccine trials. Pfizer said Tuesday
that late-stage trials for its vaccine were in the "last mile" but
called for patience as the drugmaker has yet to complete a review
of whether the vaccine was safe. Novavax said it hopes to launch
phase three trials of its own vaccine in Mexico and the U.S. by the
end of next month.
Commodity markets were also under pressure with Brent crude, the
international benchmark for oil, falling 3.8% to $40.02 a barrel.
Concerns about the economic outlook were compounded by the release
late Tuesday of bearish U.S. inventory data, said Helge Andre
Martinsen, senior oil market analyst at DNB Markets.
The American Petroleum Institute said stockpiles of U.S. crude
rose by 4.6 million barrels in the past week, exceeding consensus
forecasts of 1.1 million barrels, Mr. Martinsen said. Energy
Information Administration data are due out later Wednesday.
As risk appetite waned, investors sought the safety of U.S.
government bonds. The yield on the 10-year Treasury slipped to
0.750%, from 0.778% on Tuesday.
The ICE U.S. Dollar Index, which measures the greenback against
a basket of currencies, gained 0.8% as investors worried about
fresh lockdowns. The dollar typically rises when investors pull out
of stocks due to its status as a haven currency.
European markets have been particularly hard hit as the
Continent grapples with a surge of new cases and governments in
France and Germany consider stricter lockdowns. The pan-continental
Stoxx Europe 600 fell 2.8% to its lowest level since May. In
France, the CAC 40 index was down 3.6% and Germany's Dax index was
Investors were also shedding riskier European bonds,
resurrecting worries that Europe will have trouble pushing through
another round of relief measures if the new lockdowns make
increased spending necessary. The yield on Italy's benchmark
10-year bond rose to 0.759%, while Spanish and Greek bond yields
also climbed. German 10-year yields, considered Europe's safest,
fell to their lowest since March at minus 0.642%.
In Asia, major stock benchmarks ended the day on a mixed note.
Japan's Nikkei 225 dropped 0.3% while China's Shanghai Composite
Index closed up 0.5%.
Write to Will Horner at William.Horner@wsj.com
(END) Dow Jones Newswires
October 28, 2020 09:47 ET (13:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.