- Dow plunges 900 points as coronavirus cases keep rising
- Record COVID-19 cases
- More lockdowns to come?
- Dow closes 730 points lower after spike in coronavirus cases forces Texas and Florida to close bars again, while bank stocks sink on stress tests
- What drove the stock market?
- Which stocks were in focus?
- How did other assets perform?
Dow plunges 900 points as coronavirus cases keep rising
Stocks slumped sharply on Wall Street Monday, as a troubling climb in coronavirus case counts in the U.S. and Europe threatens the global economy.
In afternoon trading on Monday, the Dow fell more than 900 points, or 3.2%, in afternoon trading before ending the day down 650 points at 27,685. The S&P 500-stock index closed 1.9% lower— and on track for its worst day in more than a month — while the tech-heavy Nasdaq composite was down 2.7%.
Stocks also fell across much of Europe and Asia. In another sign of caution, Treasury yields were dropping again, and prices of the bonds rising, showing that investors are looking for safety as the markets continue to be rocky.
Record COVID-19 cases
Coronavirus counts are spiking in much of the U.S. and Europe, raising concerns about more damage to the still-weakened world economy. The U.S. came very close to setting back-to-back record daily infection rates on Friday and Saturday.
“Both the single-day number of U.S. cases and the seven-day moving average hit new records over the weekend, and the third wave of Covid cases continues to broaden,” Ian Shepherdson of Pantheon Macroeconomics told investors in a research note.
Coronavirus fuels financial anxiety 04:35
In Europe, Spain's government declared a national state of emergency on Sunday that includes an overnight curfew, while Italy ordered restaurants and bars to close each day by 6 p.m. and shut down gyms, pools and movie theaters.
Hopes are fading, meanwhile, that lawmakers in Washington, D.C., will be able to deliver more support for the economy anytime soon. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke several times last week on a potential deal to send cash to most Americans, restart supplemental benefits for laid-off workers and provide aid to schools, among other things.
- Read: That's the status of a second $1,200 stimulus check?
But deep partisan difference remains on Capitol Hill, and time is running out for anything to happen before the presidential election on November 3. Any compromise reached between House Democrats and the White House would also ly face stiff resistance from Republicans in control of the Senate.
“The double whammy of a stalled stimulus bill and new highs in cases is a harsh reminder of the many worries that are still out there,” Ryan Detrick, Chief Market Strategist for brokerage LPL Financial, said by email. “Most of the recent economic data has been strong, but when you see parts of Europe going to back to rolling shutdowns, it reminds us this fight is still far from over.”
More lockdowns to come?
Worries about the diminishing prospect for more stimulus in the short term helped drive the S&P 500 to a 0.5% drop last week, its first weekly loss in the last four weeks.
“While we are seeing nations attempt to stifle the spread of the virus through more localized and tentative restrictions, it seems highly ly that we will eventually see a swathe of nationwide lockdowns if the trajectory cannot be reversed,” said Joshua Mahony, senior market analyst at derivative trader IG Group in London.
“Traders remain torn as they weigh up the potential impending benefits of a U.S. stimulus package and potential vaccine,” he added.
Who needs a second round of stimulus the most… 10:26
The U.S. economy has recovered a bit since the stay-at-home restrictions that swept the country early this year eased, and economists expect a report on Thursday to show it grew at an annual rate of 30.2% during the summer quarter after shrinking 31.4% during the second quarter.
But momentum has slowed recently after a prior round of supplemental unemployment benefits and other stimulus that Congress approved earlier this year expired.
Stocks of companies that need the virus to abate and the economy to return to normal were logging some of the sharpest losses in morning trading. Norwegian Cruise Line fell 9.3%, Marathon Oil dropped 6.1% and United Airlines lost 6.2%.
Energy stocks saw the largest share-price losses among the 11 sectors that make up the S&P 500, falling in concert with oil prices. Nearly 99% of the stocks in the index were lower.
Among the market's few gainers on Monday were companies that can succeed even in a stay-at-home economy. Zoom Video Communications gained 3.1%. Shares of online retail giant Amazon Inc. was up slightly.
This upcoming week is the busiest of this quarter's earnings season, with more than a third of the companies in the S&P 500 index scheduled to report. Besides Amazon and Apple, Ford Motor, General Electric and Google's parent company, Alphabet, are also on the docket.
Across the S&P 500, profit reports for the summer have been mostly better than Wall Street had feared, though they're still on pace to be more than 16% lower than year-ago levels.
Brian Price, head of investment management for Commonwealth Financial Network, also said markets are trying assess the risks of a contested presidential election.
“I think that investors are taking some chips off the table or increasing their hedging positions in advance of what could be a tenuous period for risk assets,” he said in an email.
Dow closes 730 points lower after spike in coronavirus cases forces Texas and Florida to close bars again, while bank stocks sink on stress tests
U.S. stock indexes closed at their lowest levels in about two weeks Friday, after Texas and Florida were forced to backtrack on reopening their economies as coronavirus cases rose further and a record number of new cases were reported nationwide.
Meanwhile, investors were also parsing the results of the Federal Reserve’s bank stress tests which resulted in a cap on dividends and stock buybacks.
The Dow Jones Industrial Average DJIA, +0.50% closed 730.05 points, or 2.8%, lower at 25,015.55; and the S&P 500 index SPX, +0.52% retreated 74.71 points, or 2.4%, to close at 3,009.05, with the S&P’s financial sector SP500.40, +0.94% sinking 4.3%, and the energy sector SP500.10, +1.03% 3.5% lower. All 11 sectors of the S&P 500 closed deep into negative territory on Friday.
Meanwhile, the tech-heavy Nasdaq Composite Index COMP, +0.32% lost 259.78 points to reach 9,757.22, a fall of 2.6%.
For the week, the Dow lost 3.3%, the S&P 500 notched a 2.9% decline, and the Nasdaq fell 1.9% for the period.
What drove the stock market?
Investors have wrestled with rising daily rates of new U.S. coronavirus cases all week and that again cast a pall over the stock market on Friday.
U.S. states saw a single-day record rise of 37,000 in infections on Thursday, led by Florida, Texas, California and Arizona, surpassing the 36,188 level from April 24, according to analysis of data from Bloomberg.
That case count “blew out any of the previous records,” said Will Geisdorf, senior research analyst with Sarasota, Fl-based Allegiant Private Advisors. “I think the markets are looking at that and starting to discount the potential for a V-shaped recovery.”
As evidence mounts that consumers are losing confidence, there will be pressure on policymakers to deliver another round of fiscal stimulus, Geisdorf said in an interview. “That’s what markets need to get this period of consolidation and volatility and continue higher. We’ve had the best 50-day period in market history. Some sort of correction was needed to relieve excessive optimism.”
Governors in Texas and Florida ordered all bars to close again on Friday, making the states the first to reverse some reopening measures after months of lockdowns. Texas reported 6,426 new coronavirus cases Thursday, according to Johns Hopkins University data, and Florida reported over 8,900.
Overall, total cases in the U.S. have topped 2.4 million and that increase, notably in southern and western states in the U.S.
, has also resulted in business reopening plans being halted in North Carolina, Louisiana and Kansas.
However, governors in New York, New Jersey and Connecticut are proceeding with reopening efforts but imposing a 14-day quarantine for visitors from some hard-hit states.
“The market has been threatened by anything that jeopardizes the economic recovery,” Quincy Krosby, chief market strategist at Prudential Financial, told MarketWatch. “What you are seeing is the market react to the headlines,” she said.
The key for some investors is determining the degree by which the rise in cases results in hospitalizations and deaths, Krosby said. “It will give us a sense of whether the therapeutic treatments are working,” she said.
Investors are also digesting the results of the Federal Reserve’s annual bank stress tests which requires banks to preserve capital by suspending share repurchases and cap dividend payments in the third quarter average net income over the past four quarters.
Read: Opinion: The Federal Reserve’s bank stress tests put dividend payments at risk
However, financial institutions got a boost on Thursday after the Federal Deposit Insurance Commission and Office of the Comptroller of the Currency said they are planning to loosen the restrictions imposed by the Volcker rule and allow banks to more easily make large investments into venture capital and similar funds, among other rule rollbacks.
Check out: MarketWatch’s Need to Know column:Why one strategist is actually encouraged by the latest coronavirus data showing a spike in new cases
In U.S. economic data, consumer spending climbed in May to a record 8.2% after tumbling in April, as consumers used government stimulus checks to help Americans deal with job losses during the pandemic. However, personal incomes sank 4.2% last month, reflecting the mass unemployment.
“Consumer demand will probably look good in June as well, supported by the reopening in the Northeast and a still-elevated savings rate,” wrote Jefferies analysts Aneta Markowska and Thomas Simons. “However, stimulus payments are now shrinking and dragging down overall income growth,” the wrote.
In other economic reports, the final results of the consumer-sentiment survey in June slipped to 78.1 from an initial 78.9, the University of Michigan said Friday.
Which stocks were in focus?
- Nike Inc. NKE, +3.00% swung to a fourth-quarter loss and total sales dropped 38% despite a jump in online sales. The quarter’s online sales rose 75% with “strong double-digit increases” across geographies and made up about a third of total revenue for the quarter. Shares were down 7.6%.
com Inc. AMZN, -0.19% announced that it was purchasing self-driving car company Zoox for more than $1 billion, according to reports. The company’s stock fell about 2.2%.
- Shares of Gap Inc. GPS, +1.36% surged about 19% after the retailer reported that it was teaming up with hip-hop star Kanye West.
- Vaxart Inc. VXRT, -3.67% said Friday its oral COVID-19 vaccine has been selected to take part in a nonhuman primate challenge study funded by the U.S. government’s ‘Operation Warp Speed’ program, that aims to accelerate development of a vaccine. Shares were up more than 28%.
- Microsoft Corp. MSFT, +0.
64% said Friday it will close all of its physical store locations, as part of the software and cloud giant’s new approach to retail. Its stock was down 2%.
- Shares of Inovio Pharmaceuticals Inc. INO, -0.99% lost 4% Friday, after a downgrade from Stifel Nicolaus on valuation concerns.
- Inc. , +0.
60% Shares of media giantsand Inc. TWTR, -1.00% tumbled more than 7% after Unilever N.V. US:UN said it would join in halting advertising on the platforms until hate speech concerns were addressed.
- Albertsons Companies Inc. ACI, +2.
03% shares were trading lower on Friday after it priced its initial public offering.
How did other assets perform?
West Texas Intermediate U.S. crude US:CLQ20 for August delivery fell 23 cents, or 0.6%, to settle at $38.49 a barrel on the New York Mercantile Exchange. In precious metals, gold futures US:GCM20 edged $9.70, or 0.6%, higher, to settle at $1,780.30 an ounce.
The 10-year Treasury note yield TMUBMUSD10Y, 1.661% fell about 4 basis points to 0.647% amid inflows into safe-haven assets. Bond prices move inversely to yields.
The greenback was virtually unchanged against a basket of its major rivals, trading in the ICE U.S. Dollar Index. DXY, +0.30%
In global equities, the Stoxx Europe 600 index SXXP, +0.92% fell 0.4% to close at 358.32 and London’s FTSE 100 UKX, +0.85% closed up 0.2% at 6,159.30.
In Asian markets, the Japanese Nikkei NIK, +1.56% gained 1.1%, Hong Kong’s Hang Seng HSI, +1.57% lost 0.9%, while South Korea’s Kospi advanced 1.1%. Markets in China were closed for a holiday.