US stocks extend sell-off over Covid-19 and election worries

New York — The S&P 500 and the Dow slumped on Wednesday to their lowest levels since late September, as coronavirus cases climbed globally and investors also worried about the possibility of a contested US presidential election next week.

A resurgent pandemic and the failure to approve new fiscal stimulus before the November 3 election put the blue-chip Dow on track to close at its lowest since early August. All three major indices fell about 3%.

Twelve US states set records for hospitalised Covid-19 patients on Tuesday, while Germany announced plans to shut large swathes of public life for a month and France prepared tighter controls as the pandemic surged there.

“Obviously the virus is out of control. It’s spiking, it’s bad,” said Eric Kuby, chief investment officer at North Star Investment Management in Chicago. “The concept that … it’s going to disappear is just a faulty assumption.”

Shares of hotels, airlines and other companies sensitive to Covid-19-related turmoil fell. Wynn Resorts slid 3.6% and the S&P 1500 airlines index declined 4%. The energy index fell 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 July 15, also on concerns that a winner might not be declared the night of November 3 due to a delay in counting the huge volume of mail-in ballots.

Democratic challenger Joe Biden leads President Donald Trump nationally by 10 percentage points, according to the Reuters/Ipsos poll, but the competition is tighter in swing states, which will decide the victor.

Investors are worried about whether the election will be contested, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“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 weighing the most.

The Big Tech companies — Apple, Alphabet, Amazon and Facebook — which are due to report results on Thursday, fell between 3% and 4.7%, weighing the most on the S&P 500.

Before the close, the Dow Jones Industrial Average fell 792.7 points, or 2.89%, to 26,670.49. The S&P 500 lost 96.32 points, or 2.84%, to 3,294.36 and the Nasdaq Composite dropped 339.66 points, or 2.97%, to 11,091.70.

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.

Microsoft’s quarterly results surpassed analysts targets, benefiting from a pandemic-driven shift to working from home and online learning. Its shares, however, fell about 4% after rising nearly 35% so far in 2020.

General Electric was one bright spot, jumping 8% after posting a surprise quarterly profit and a positive cash flow on the back of cost cuts and improvements in its power and renewable energy businesses. GE was the largest percentage gainer on the S&P 500.

Reuters