Stocks Slide as Virus Cases Surge
Last Updated
Oct. 26, 2020, 7:13 p.m. ET10 minutes ago10 minutes ago
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A rise in coronavirus cases in the United States, new restrictions on activity in Europe and a standoff in Washington over economic relief for struggling businesses and out-of-work Americans left investors reeling on Monday.
The S&P 500 fell about 1.9 percent after recovering some ground in afternoon trading. Still, Monday’s decline was the index’s biggest one-day drop in more than a month.
“You can only pretend that Covid was not a problem for so long,” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn. “I think the market has finally kind of gotten it through its head at the same time that there’s very little shot at stimulus.”
Shares in Europe also ended lower as more limits were introduced to try to combat a second wave of the coronavirus pandemic. In Spain, the government declared a state of emergency and imposed a nighttime curfew. In Italy, cinemas and gyms are closing and indoor dining is ending at 6 p.m. In France, a six-week curfew for most of the country began on Friday.
Tourism-related stocks like cruise-ship operators and airlines led the decline Monday. These companies have suffered the most from lockdowns, travel restrictions and the drop in demand for flights, cruises and hotels as consumers around the world are encouraged not to take unnecessary risks, and their share prices have become something of a bellwether for investor sentiment toward the pandemic.
Royal Caribbean Cruises, Carnival and Norwegian Cruise Line each dropped more than 8 percent, putting them among the worst-performing stocks in the S&P 500. United Airlines fell about 7 percent, while Marriott International dropped more than 5 percent.
Bank stocks and shares of industrial and energy companies were also sharply lower, reflecting concern for the economy as cases rise. That worry spread to other markets as well. Crude oil futures were down more than 3 percent, and the government bond market also showed diminished expectations for growth.
Coronavirus case numbers have climbed to new highs in the United States in recent days, and the prospects of more economic aid for shuttered businesses and laid-off workers have dimmed considerably with the presidential election just eight days away.
Uncertainty around the election already had investors on edge, but it had helped somewhat that Democrats and the White House were striving to reach a stimulus deal. Hopes for a plan that might inject as much as $2 trillion of government spending into the economy had helped lift stock prices earlier this month, but that optimism began to fade late last week as talks failed to advance.
Economists have warned that government spending is critical to ensuring the American economy is able to bounce back from the coronavirus crisis.
The political climate, including concern about a contested election as well as a potential vacuum of information that could follow Election Day as votes are still counted, has increased turbulence on Wall Street lately.
Stocks rallied earlier this month on the expectation that a clean sweep by Democrats could lead to a more clear-cut outcome and a wave of government spending to prop up the economy.
But with the losses on Monday factored in, most of those gains have been erased, and the S&P 500 is now about 5 percent below a record it reached in early September.
The New York Times