U.S. stocks tumbled on Wednesday, with the Dow closing at lows last seen in late July, as coronavirus cases soared globally and investors worried about the possibility of a contested U.S. presidential election next week.
The spiraling pandemic and Washington’s failure to reach a deal on new fiscal stimulus before the Nov 3 election drove all three stock indexes to close more than 3% lower in heavy trade.
The sell-off accelerated during the session’s final minutes, with both the Dow and benchmark S&P 500 posting their biggest single-day declines since June 11.
Twelve U.S. states set records for hospitalised COVID-19 patients, while Germany and France announced plans to shut large swathes of public life for a month as the pandemic surged across Europe.
“Obviously the virus is out of control. It’s spiking, it’s bad,” said Chicago’s North Star Investment Management Corp chief investment officer Eric Kuby. “The concept that it’s going to disappear is just a faulty assumption.”
Shares of hotels, airlines and other leisure-related companies sensitive to COVID-19-related turmoil sank, with the S&P 1500 airlines index falling 4.3%. The energy index slid 4.2% as oil prices tumbled on fears of a deeper drop in fuel demand.
With just six days to the election, Wall Street’s fear gauge spiked to its highest level since June 15. Concerns that a winner might not be declared the night of Nov 3 also spurred the wide sell-off.
Democratic challenger Joe Biden leads President Donald Trump nationally by 10 percentage points, according to Reuters/Ipsos polling, but the competition is tighter in swing states, which will decide the victor.
Investors are worried about various potential outcomes: that the election may be contested; a “blue wave” gives Biden a victory and his Democrats control of Congress; or that Trump gets re-elected, said North Carolina’s Independent Advisor Alliance in Charlotte chief investment officer Chris Zaccarelli.
“As people run through the likely scenarios of what could happen with the election, there’s no short-term good answer,” he said.
Losses were broad-based with technology stocks down 4.33%, weighing the most.
The Big Tech companies – Apple, Alphabet and Facebook – which are due to report results on Thursday, all fell 4.6% or more. With Microsoft and Amazon.com, they weighed the most on the S&P 500.
The Dow Jones Industrial Average fell 943.24 points, or 3.43%, to 26,519.95, the S&P 500 lost 119.65 points, or 3.53%, to 3,271.03 and the Nasdaq Composite dropped 426.48 points, or 3.73%, to 11,004.87.
Volume on U.S. exchanges was 11 billion shares.
Of the 206 S&P 500 companies that have reported third-quarter earnings so far, about 83% have topped expectations, according to Refinitiv data. But earnings on average are expected to fall 14.8% from a year earlier.
The S&P 500 posted one new 52-week highs and nine new lows; the Nasdaq Composite recorded 15 new highs and 110 new lows. – Oct 29, 2020
