US stocks sink to seven-week low on new Covid lockdown fears

New York  — Wall Street’s main indices slid to seven-week lows on Monday, with the S&P 500 and Dow each tumbling more than 2%, as concerns about fresh coronavirus-driven lockdowns in Europe raised fears the US economy faces a longer road to recovery than expected.

The death of US Supreme Court Justice Ruth Bader Ginsburg increased the likelihood another stimulus package will not be approved in Congress before the November 3 presidential election and sparked large declines in the health-care sector.

The Dow shed as much as 900 points and the CBOE Market Volatility index, Wall Street’s fear gauge, shot up to its highest level in nearly two weeks.

Ginsburg’s death added to growing uncertainty about the election outcome and health of the economy.

“It just kind of crowds out the agenda, the idea that we are going to get a fiscal stimulus package before the election,” said Ed Campbell, portfolio manager and MD at QMA in Newark, New Jersey.

“There is also just general election-related jitters … and possibly that we have a contested or delayed outcome.”

Congress has for weeks remained deadlocked over the size and shape of a fifth coronavirus-response bill, on top of the roughly $3-trillion already enacted into law.

Health-care providers came under pressure on uncertainty over the fate of the Affordable Care Act, better known as Obamacare, with shares of Universal Health Services falling more than 11%.

Ginsburg’s death could lead to a tie vote when the supreme court hears a challenge to the constitutionality of Obamacare  in November, Mizuho, Stephens and other financial services firms said.

Wall Street has tumbled in the past three weeks as investors dumped heavyweight technology-related stocks after a stunning rally that lifted the S&P 500 and the Nasdaq to new highs after plunging in March as economies entered recession.

Another round of business restrictions will threaten a nascent recovery in the wider economy and add further pressure on equity markets, analysts said. The first round of lockdowns in March had led the S&P 500 to suffer its worst monthly decline since the global financial crisis.

In contrast to last week’s trend, declines were led by value-orientated sectors such as industrials, energy and financials as opposed to technology stocks. Financials were poised to notch their worst day since June 26.

Airline, hotel and cruise companies tracked declines in their European peers as the UK signalled the possibility of a second national lockdown. Europe’s travel and leisure index marked its worst two-day drop since April.

The largest gainer among the Nasdaq 100 was Zoom Video Communications, which rose 6.2% on the prospect that fresh lockdowns would spur greater use of the product.

In late afternoon, the Dow Jones Industrial Average was down 847.22 points, or 3.06%, at 26,810.2, the S&P 500 lost 82.75 points, or 2.49%, to 3,236.72 and the Nasdaq Composite dropped 178.22 points, or 1.65%, to 10,615.06.

JPMorgan and Bank of New York Mellon fell 3.82% and 4.71%, respectively, on reports that several global banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

The S&P banking subindex lost 4.3%.

Nikola plunged 20.2% after its founder, Trevor Milton, stepped down as executive chair after a public squabble with a short-seller over allegations of nepotism and fraud.

General Motors, which recently said it would take an 11% stake in the electric truck maker, slipped 5.5%

Reuters