By Will Horner and Juliet Chung 

U.S. stocks continued to sell off on Wednesday in what is shaping up to be their worst week since late March, as rising coronavirus infections shook investors' confidence in the global economic recovery.

The Dow industrials lost 943.24 points, or 3.4%, to 26519.95, their fourth losing session in a row and worst day since June 11.

The S&P 500 fell 119.65, or 3.5%, to 3271.03, its third consecutive down session. The benchmark has slipped more than 8% from its record closing level in early September and its gains for the year now stand around 1.3%.

The Nasdaq Composite dropped 426.48, or 3.7%, to 11004.87, trimming its gains for the year to 22.7%. The stock prices of Facebook, Google parent Alphabet and Twitter dropped more than 5% each after their chief executives squared off against U.S. senators in a congressional hearing over their companies' roles moderating public discourse.

Stocks have slid lower this week on a raft of uncertainties, sparking discussion from investors about whether the selloff marked a buying opportunity or a turn in the market.

Worsening coronavirus case numbers may make more stringent restrictions imperative across the U.S. and Europe, potentially dealing a setback to a 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. Germany on Wednesday announced a one-month partial lockdown to stem a resurgence of cases.

"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 Hopkins University.

Susan Webb, founder and chief investment officer of investment firm Appomattox, said the market was factoring in fears that shutdowns would stall 20% of the domestic economy -- that related to sectors such as travel, entertainment and restaurants -- and hit the economies of tourism-dependent countries such as Spain and Italy.

She also attributed some of the selloff to investors rebalancing their portfolios as they assess the virus's hold in different geographies.

"There is a rotation going on," Ms. Webb said. "A lot of people are taking some money off the table in U.S. equities where they've become substantially overweight as Europe has sold off, and there's a recognition Asia is recovering faster and has gotten control of this pandemic."

Some investors also remain leery about the U.S. election, and whether delays in counting mail-in ballots or other complications may lead to uncertainty in the days after the Nov. 3 election. The S&P 500 remains on track for its worst week before a presidential election on record.

While uncertainty related to a change of administration has historically resulted in selloffs, said David Bailin, investment chief of Citi Private Bank, the uncertainty is particularly pronounced this time. Among the reasons, he said, is worry "that no decision is reached in a reasonable period of time" on the election and that a surprise victory by President Trump would mean continued global trade wars.

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 recovery.

A rare bright spot Wednesday was General Electric, whose shares were up $0.32, or 4.5%, to $7.42 after it surprised analysts with a third-quarter profit. Automatic Data Processing shares jumped $9.05, or 6.2%, to $155.08 after quarterly profits rose year-over-year.

Microsoft's stock was down $10.57, or 5%, to $202.68 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, said Jeff Mills, chief investment officer at Bryn Mawr Trust, 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."

Mr. Bailin said he viewed the selloff as a tailored buying opportunity, noting that markets would have the ability to look further out once an effective vaccine is announced. Financial stocks, emerging markets and shipping all stand to benefit when stocks get repriced with the pandemic's wane, he said.

Commodity markets were also under pressure with Brent crude, the international benchmark for oil, falling 5% to $39.12 a barrel.

The yield on the 10-year Treasury edged higher to 0.78%, from 0.778% on Tuesday.

The ICE U.S. Dollar Index, which measures the greenback against a basket of currencies, gained 0.5% 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. The pan-continental Stoxx Europe 600 fell 2.95% to its lowest level since May.

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.

Write to Will Horner at William.Horner@wsj.com and Juliet Chung at juliet.chung@wsj.com

 

(END) Dow Jones Newswires

October 28, 2020 17:53 ET (21:53 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.