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Stocks Plunge on Lockdown Fears, Likely Stimulus Delay

Stocks Plunge on Lockdown Fears, Likely Stimulus Delay

Monday, 21 September 2020 04:05 PM

Wall Street's main indexes closed lower on Monday as concerns about new lockdowns in Europe and possible delays in fresh stimulus from Congress raised fears the U.S. economy faces a longer road to recovery than previously hoped for.

The death of U.S. Supreme Court Justice Ruth Bader Ginsburg also appeared to make the passage of another stimulus package in Congress less likely before the Nov. 3 presidential election, sparking large declines in the healthcare sector.

The Dow shed as much as 900 points and the CBOE Market Volatility index, Wall Street's fear gauge, shot up to its highest level in nearly two weeks. The S&P 500 ended down less than 9% from its record high on Sept. 2 after paring losses that had pushed the benchmark almost into corrective territory.

Economic concerns are weighing most heavily on stocks, said David Joy, chief market strategist at Ameriprise.

"Although nothing is being spared, the economically sensitive groups are getting hit the hardest," said Joy, adding that "Washington appears to be no closer to a possible fourth stimulus package."

Congress has for weeks remained deadlocked over the size and shape of another coronavirus-response bill, on top of the roughly $3 trillion already enacted into law.

Healthcare providers came under pressure on uncertainty over the fate of the Affordable Care Act (ACA), better known as Obamacare, with shares of Universal Health Services falling hard.

Ginsburg's death could lead to a tie vote when the Supreme Court hears a challenge to the constitutionality of ACA in November, Mizuho, Stephens Inc and other financial services firms said.

"It just kind of crowds out the agenda, the idea that we are going to get a fiscal stimulus package before the election," said Ed Campbell, portfolio manager and managing director at QMA in Newark, New Jersey.

"There is also just general election-related jitters ... and possibly that we have a contested or delayed outcome."

Wall Street has tumbled in the past three weeks as investors dumped heavyweight technology-related stocks following a stunning rally that lifted the S&P 500 and the Nasdaq to new highs after plunging in March as economies entered recession.

A new round of business restrictions would threaten a nascent recovery and further pressure equity markets. The first lockdowns in March led the S&P 500 to suffer its worst monthly decline since the global financial crisis.

In contrast to last week's downturn, declines were led by value-oriented sectors such as industrials, energy and financials as opposed to technology stocks .

Airline, hotel and cruise companies tracked declines in their European peers as Britain signaled the possibility of a second national lockdown. Europe's travel and leisure index marked its worst two-day drop since April.

The largest gainer on the Nasdaq 100 was Zoom Video Communications Inc, which rose 6.8% on the prospect that fresh lockdowns would spur greater use of the product.

The Dow Jones Industrial Average fell 509.72 points, or 1.84%, to close at 27,147.7, the S&P 500 lost 38.41 points, or 1.16%, to 3,281.06 and the Nasdaq Composite dropped 14.48 points, or 0.13%, to 10,778.80.

JPMorgan Chase & Co and Bank of New York Mellon Corp fell 3.1% and 4.0%, respectively, on reports that several global banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

Nikola Corp plunged 19.3% after its founder, Trevor Milton, stepped down as executive chairman following a public squabble with a short-seller over allegations of nepotism and fraud.

General Motors Co, which recently said it would take an 11% stake in the electric truck maker, slipped 4.76%.

Volume on U.S. exchanges was 10.62 billion shares.

Declining issues outnumbered advancing ones on the NYSE by a 5.94-to-1 ratio; on the Nasdaq, a 4.25-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week high and 1 new low; the Nasdaq Composite recorded 20 new highs and 54 new lows.

GLOBAL MARKETS

Stocks across the world hit their lowest in seven weeks and other risk assets also sold off on Monday on concerns over renewed lockdown measures in Europe and Britain, as well as the United States' inability to agree on fiscal stimulus that would support millions of unemployed.

Oil prices fell more than 3%, the dollar rose against a basket of peers and an index of emerging market currencies fell by the most in six months. The MSCI world equity index , which tracks shares in 49 countries, ended at its lowest since Aug. 3.

Britain is considering a second national lockdown as new cases rise by at least 6,000 per day while Denmark, Greece and Spain have introduced new restrictions on activity. Germany's health minister said rising new infections in countries like France, Austria and the Netherlands are worrying.

Adding to the market's nervousness, the U.S. presidential campaign was upended late Friday after U.S. Supreme Court Justice and liberal icon Ruth Bader Ginsburg died. President Donald Trump said he would announce his candidate to replace her, which requires Senate confirmation, by the end of this week.

Ginsburg's death also decreases the chances of Congress passing another stimulus package to help lift the domestic economy.

"It just kind of crowds out the agenda, the idea that we are going to get a fiscal stimulus package before the election," said Ed Campbell, portfolio manager and managing director at QMA in Newark, New Jersey.

"There is also just general election-related jitters... and possibly that we have a contested or delayed outcome."

The U.S. presidential election will be held on Nov. 3.

The pan-European STOXX 600 index lost 3.24% and MSCI's gauge of stocks across the globe shed 1.63%.

Emerging market stocks lost 1.64%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.26% lower.

Japan has public holidays on Monday and Tuesday this week, meaning volumes are expected to be thin in Asian trading.

Markets were also hit by a media report on how several global banks moved large sums of allegedly illicit funds over nearly two decades.

The S&P banking subindex fell 3.4%.

'CONCERNS RISING'

The dollar rose on Monday after two weeks of declines as investors sought safer currencies.

"An unrelenting rise in coronavirus cases globally is weighing on sentiment at the start of the trading week as investors increasingly question their rosy predictions about the recovery," said Raffi Boyadjian, senior investment analyst at online broker XM.

The dollar index rose 0.609%, with the euro down 0.57% to $1.177.

The Japanese yen weakened 0.09% versus the greenback at 104.68 per dollar, while Sterling was last trading at $1.2816, down 0.77% on the day.

Seven members of the Fed will speak this week, including Chairman Jerome Powell appearing before congressional committees, and investors will be looking for hints to determine the dollar's direction.

Crude oil followed equity markets lower.

"We're looking for a much softer market," said Gary Cunningham, director of market research at Tradition Energy in Stamford, Connecticut. "The economic picture doesn't look as rosy as it did before."

U.S. crude fell 3.53% to $39.66 per barrel and Brent was at $41.75, down 3.24% on the day.

Benchmark 10-year notes last rose 8/32 in price to yield 0.6691%, from 0.694% late on Friday.

Spot gold dropped 1.9% to $1,912.19 an ounce.

© 2020 Thomson/Reuters. All rights reserved.


   
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Wall Street's main indexes tumbled on Monday as concerns about new lockdowns in Europe and possible delays in fresh stimulus from Congress raised fears the U.S. economy faces a longer road to recovery than expected.
wall street, stock, market, virus, stimulus
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2020-05-21
Monday, 21 September 2020 04:05 PM
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