U.S. stocks fell sharply at the start of Monday’s trade, joining in a global selloff tied to a jump in COVID-19 cases in Europe, a news report alleging major global banks continued doing business with customers suspected of wrongdoing, and the lack of progress toward another round of fiscal stimulus out of Washington.
What are major benchmarks doing?
The Dow Jones Industrial Average fell 599 points, or 2.2%, to 27,058. The Nasdaq Composite shed 178 points, or 1.6%, to 10,616. The S&P 500 slipped 63 points, or 1.9%, to 3,257. If the broad-market index finishes below 3,222.76, it would enter correction territory, defined as a 10% drop from its recent peak.
Major U.S. benchmarks have suffered three consecutive weekly losses. The Dow fell 244.56 points Friday, or 0.9%, to end at 27,657.42, dragging the blue-chip gauge to a 0.03% weekly decline. The S&P 500 and the tech-heavy Nasdaq Composite both booked weekly losses of 0.6%.
The small-cap Russell Index found favor, however, logging a 2.6% rally last week.
What’s driving the market?
U.S. and European equities tumbled as a rising number of COVID-19 cases across several European economies sparked fears of renewed restrictions on activity, a development that would slow the global economic recovery’s pace.
London Mayor Sadiq Khan was in talks on Monday to discuss introducing new measures to stem the coronavirus’ spread.
“What we need to see is to what extent the rise in cases impacts the economic recovery. Data has basically stalled over the summer, so if [European policy makers] manage to keep activity going with ‘minor’ measures, data can hold up. But if the situation deteriorates further or self-discipline impacts growth even further, we could have a tougher few months for European assets,” said Esty Dwek, head of global macro strategy for Natixis Investment Managers, in e-mailed comments.
U.S. and European bank shares fell sharply after BuzzFeed News and other outlets published articlesalleging that the world’s most powerful banks continued doing business with customers they suspected of engaging in money laundering and other illicit activities.
The SPDR Financial Select Sector ETF fell 2.1%, underperforming the selloff in the broader stock market. Shares of JP Morgan Chase & Co., which was mentioned in the investigative news report, fell 2.5%.
Investors were also weighing the potential market implications of the death of Supreme Court Associate Justice Ruth Bader Ginsburg, which appeared set to spark an intense battle over the nomination of her successor, complicating an already bitter presidential election race and further clouding prospects for an agreement on a new round of fiscal stimulus to shore up a U.S. economy.
President Donald Trump on Saturday said he would announce a nominee soon, while Democrats contend the winner of the Nov. 3 election should choose the nominee after the Republican-led Senate in 2016 used that rationale to block a nomination by Barack Obama following the death of Associate Justice Antonin Scalia.
“Both sides of the political spectrum were energized by the president’s actions only complicating the already volatile U.S. election landscape. Indeed with economic data stalling the story in the markets could turn to geopolitical risk which by its very nature suggests far more volatile price action in week’s ahead,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.
Tech-related stocks, which had led the market’s rally back from the March pandemic lows, have flagged in recent weeks, leading the market back down from all-time highs.
On Monday, Dallas Federal Reserve President Rob Kaplan said the Fed’s new forward guidance could create “fragilities” and “excesses” in financial markets. Other central bankers including New York Fed President John Williams will speak throughout the day.
In economic data, the Chicago Fed’s national activity index, which is designed to gauge overall U.S. economic activity, fell to 0.79 in August from a revised 2.54 in the prior month.
Which companies are in focus?
- Shares of electric truck maker Nikola Corp. dropped 21% after founder Trevor Milton resigned as executive chairman following allegations by a short seller the company had misled investors about its technology.
- Oracle Corp. shares were up 2.9% after Trump on Saturday said he had given his “blessing” to a proposed deal that would see the company and Walmart Inc. take over U.S. operations of Chinese-owned app TikTok. Walmart shares were up more than 1%.
- Shares of Toll Brothers Inc. even after the luxury home builder issued a upbeat mid-quarter update.
- Microsoft Corp. announced the acquisition of ZeniMax Media and its game publisher Bethesda Softworks for $7.5 billion in cash. Its shares were down 1.5%.
- Shares of electric car maker Tesla Inc. were up 1.7% a day ahead of its battery-technology day.
What are other markets doing?
The yield on the 10-year Treasury note fell 2.8 basis points to 0.66%. Bond prices move inversely to yields.
The ICE U.S. Dollar Index, which tracks the performance of the greenback against its major rivals, was up 0.4%.
Gold futures were down 1.3% at $1,937.30 an ounce. The U.S. crude oil benchmark fell 2.1% to $40.24 a barrel.
The Stoxx Europe 600 Index dropped 2.6%, while the U.K.’s benchmark FTSE was down 3.2%. In Asia, Hong Kong’s Hang Seng Index fell 2.1% and the Shanghai Composite Index fell 0.6%, while Japan’s Nikkei was closed for a public holiday.