Wall Street collapsed on Monday as markets around the world fell amid concerns over the economic pain of the pandemic, although the S&P 500 cut losses at the end of the day.
The declines started in Asia as soon as trade opened for the week, and accelerated in Europe amid concerns about the possibility of tighter restrictions there to stem the surge in coronavirus numbers. In the United States, stocks and treasury yields weakened, while the prices of oil and other commodities demanded a healthy economy.
The S&P 500 fell 38.41 points, or 1.2%, to 3,281.06. It extends the index’s losing streak to four days, its longest since stocks sold in February on fears of a recession. But a late rally helped the blue chip index more than halve its 2.7% loss earlier today.
The Dow Jones Industrial Average fell 509.72, or 1.8%, to 27,147.70 after recovering from a previous drop of 942 points. The Nasdaq composite slipped 14.48, or 0.1%, to 10,778.80 after recovering from a 2.5% decline.
Wall Street has been volatile this month, and the S&P 500 has fallen 8.4% since reaching an all-time high on September 2 amid a long list of investor worries. Chief among them are fears that stocks will become too expensive as the coronavirus count continues to escalate, Congress is unable to provide more aid to the economy, U.S.-China tensions rise and a controversial election in the United States is approaching.
Investors should expect the stock market to remain volatile, perhaps until the November election, as they wait for these questions to dissipate, said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management.
Monday’s sales were exacerbated by concerns about the possibility of further trade restrictions in Europe, particularly as the United States heads into flu season, Draho said, and “some investors may back out” .
David Joy, chief market strategist at Ameriprise Financial, noted that Monday’s steepest declines were concentrated in areas of the market most closely linked to the strength of the economy, such as energy companies and producers of raw materials.
“It seems to be a broader expression of concern about the economy,” he said.
Bank stocks suffered steep losses after a report alleged that several of them continue to profit from illicit transactions with criminal networks, despite the US crackdown on money laundering.
Investors are also worried about the diminished prospects that Congress could soon provide more aid to the economy. Many investors are calling this support crucial after the expiration of additional weekly unemployment benefits and other stimulus measures. But partisan disagreements have delayed any renewal of what is called the CARES Act.
“The CARES bill stimulus money, the impact of that, is running out, and there doesn’t seem to be any urgency in Washington to get another package,” Joy said.
Partisan resentment only escalates, dashing hopes even further. The sudden vacancy in the Supreme Court following the death of Justice Ruth Bader Ginsburg is the latest flashpoint dividing the country.
Tensions between the world’s two largest economies are also weighing on the markets. President Donald Trump has targeted Chinese tech companies in particular, and the Commerce Department on Friday announced a list of bans that could potentially cripple the U.S. operations of Chinese-owned TikTok and WeChat apps. The government has raised issues of national security and data privacy.
This raises the threat of Chinese retaliation against American companies.
In addition to all of these concerns for the market, there is the continuing coronavirus pandemic and its effects on the global economy.
The UK government reported 4,422 new coronavirus infections on Sunday, its biggest daily increase since early May. An official estimate shows that new cases and hospital admissions are doubling every week.
Prime Minister Boris Johnson is expected to announce later this week a series of short-term restrictions that will act as a ‘circuit breaker’ to slow the spread of the disease. The number of cases is rising rapidly in many European countries, and while authorities do not appear ready to return to the severe restrictions on public life they imposed in the spring, the new wave of the pandemic threatens the economic outlook.
September’s losses for the markets offset months of remarkable gains. Beginning in late March, when the Federal Reserve and Congress pledged to massively support the economy, the S&P 500 wiped out its nearly 34% loss caused by the pandemic. Signs of nascent economic improvements have accelerated gains, but growth has slowed recently.