U.S. stocks fell sharply early Thursday, setting the stage for a third day of weakness for equities, following losses in Asia and Europe overnight as new restrictions were imposed to combat rising coronavirus cases in many parts of the world.
Market participants were also disappointed by a rise in U.S. jobless claims and the lack of progress in Congress on another fiscal stimulus bill which is now unlikely until after the November elections.
How are stock benchmarks performing?
The Dow Jones Industrial Average was trading 282 points, or 1%, lower at 28,238; the S&P 500 index was down 34 points to reach around 3,454, a drop of 1%, while the Nasdaq Composite Index slumped by 1.1%, a fall of 125 points to about 11,638.
Meanwhile, the Dow Jones Transport Average rose 104.27 points, or 0.9%, to a record high of 11,887.49, its fifth record close for October, according to Dow Jones Market Data.
What’s driving the market?
Concern about the impact of rising numbers of COVID-19 cases and fading hopes for any further fiscal stimulus from Congress before the November elections are weighing on investor sentiment, while third-quarter earnings reporting rolls on with mixed results.
“Renewed health concerns and tighter restrictions around Europe are hammering stocks this morning,“ wrote David Madden, market analyst at CMC Markets UK, in a note.
France joined the U.K. in imposing fresh social restrictions, including declaring a state of emergency and a nightly curfew in a number of metropolitan regions across the country. The U.K. has been tightening social restrictions also to help limit the spread of the outbreak.
Market participants have also been discouraged by a lack of progress in negotiations between House Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin on an additional round of fiscal stimulus to help stem economic hardship from the COVID-19 pandemic. Mnuchin during an interview on CNBC Thursday morning said that a pact on a deal before year-end wasn’t something he wanted to rule out but Senate Republicans, favoring a more narrower stimulus than Democrats, must still to agree.
Meanwhile, investors have been poring over corporate earnings, with the last of the major Wall Street banks, Morgan Stanley posting a third-quarter profit of $2.7 billion, or $1.66 per share, besting consensus estimates for $1.28 by Refinitiv and producing revenue of $11.7 billion that were 16% better than a year ago. Morgan Stanley’s report comes after Bank of America, JPMorgan Chase & Co., Citigroup and Wells Fargo & Co., all reported mixed results.
Dow component Walgreens Boots Alliance, meanwhile, also reporting better-than-expected results.
The Nasdaq index was also depressed by a Goldman Sachs note cutting its recommendation on technology stocks to neutral, saying likely policy shifts and slowing economic growth may temporarily cap the outperformance of the sector.
In economic reports, U.S. weekly jobless claims data, a closely watched high-frequency date point in the pandemic era, climbed 53,000 to 898,000, representing the highest level since Aug. 22.
“The labor market did a good job recouping more than half of the job losses from March. But what the continued elevation of jobless claims and other labor market data tells us is that recouping that second half is going to be a lot harder,” said Michael Arone, chief investment strategist at State Street Global Advisors, in an interview.
In other data, the Philadelphia Federal Reserve’s factory index jumped to 32.3 in October well above consensus forecast of 13.5. The index hit 15 in September. Separately, the Empire State manufacturing index fell to 10.5 in October from 17 in prior month.
Among Fed speakers, Randal Quarles, vice chairman of supervision at the Fed will deliver a speech about the response to COVID to the Institute of International Finance at 11 a.m., while Dallas Fed President Robert Kaplan is set to speak at the U.S. India Chamber of Commerce at the same time.
Later in the day, Minneapolis Fed President Neel Kaskari, will speak about the U.S. economic outlook to the New York University Stern School at 5 p.m.
Finally both President Donald Trump and Joe Biden, Democratic contender for the presidency in November’s elections, will both hold separate “town hall” sessions on competing television channels at 8 p.m. Eastern Thursday night, after the scheduled second debate was cancelled.
Which stocks are in focus?
- Shares of Walgreens Boots Alliance Inc. jumped 6% Thursday, after the drugstore services company reported a fiscal fourth-quarter profit that fell less than expected, while revenue rose above forecasts.
- YogaWorks Inc. the chain of studios and international yoga schools, has filed for chapter 11. Shares tumbled nearly 60%.
- Shares of Roku Inc. fell 2.5% Thursday, to extend their pullback from a record close earlier this week, after KeyBanc Capital analyst Justin Patterson backed away from his longtime bullish stance, citing concerns over valuation.
- Tiffany & Co. offered guidance for the fourth quarter on Thursday, saying it expects a mid-single digit percentage decline in sales compared with the year-earlier period and a mid-single digit percentage increase in operating earnings. The stock was up 0.5%.
- Shares of Tesla Inc. dropped 1.8% Thursday, putting them on track to snap a 6-day win streak, even as Baird analyst Ben Kallo boosted his price target by 25%.
- Vertex Pharmaceuticals Inc. stock lost nearly 17% Thursday after the biotech company said it would stop developing a drug to treat an inherited protein deficiency that can cause lung and liver disease.
- Fastly Inc. shares plummeted 30% after the software company said that its largest customer, TikTok parent Bytedance Inc., didn’t use its product as much as expected amid a threatened ban in the U.S.
- Wells Fargo & Co. fired more than 100 employees for allegedly defrauding a federal pandemic-relief program. Shares declined 1.2% early Thursday.
How are other assets performing?
The yield on the 10-year Treasury note pulled back 2.2 basis points to 0.70%. Yields and bond prices move in opposite directions.
In global equities, Hong Kong’s Hang Seng Index closed 2.1% lower and Japan’s Nikkei 225 fell 0.5%.
In Europe, the pan-European Stoxx 600 Europe was trading 2.5% and London’s FTSE 100 was slumping 2.5%.
Gold prices retreated 0.5% to trade at $1,899.10. an ounce. Oil futures tanked, pushing the U.S. benchmark more than 3.3% lower in early Thursday action.
The greenback was 0.2% lower at 93.35, based on the ICE U.S. Dollar Index.