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By Jem Bartholomew and Dawn Lim 

U.S. stocks fell Friday, with the Dow Jones Industrial Average closing out its worst week and month since March in the final lap of the presidential race.

Volatility reigned in the week before the Nov. 3 contest. Investors have been spooked by a record high in coronavirus infections in the U.S., fresh lockdowns in Europe that threaten economic growth and a mixed bag of earnings report from big technology companies.

“Markets are concerned that we are replaying February and March,” said Chris Beauchamp, chief market analyst at IG Group. “It probably still isn’t in that category yet, but it is heading in the wrong direction.”

The Dow dropped 0.6% on Friday, paring its worst losses of the day. The blue-chip index however shed more than 6.4% this week, its worst weekly performance since the height of the pandemic-induced market tumult.

The S&P 500 fell 1.2%, pulled down by declines in most of its 11 sectors. The benchmark index is now up just 1% in 2020. The Nasdaq Composite dropped 2.5% following a sharp selloff in big tech stocks.

All three indexes suffered losses of more than 2% for October, their second consecutive month of declines. After a remarkable run since late March, stocks peaked in early September–and tumbled initially on worries the market had run too far, too fast.

Although economic data and corporate earnings have improved lately, many investors fear the impact of another round of lockdowns in the event the number of coronavirus cases continues to increase.

U.S. households boosted spending in September, according to the Commerce Department. But even as consumers increased spending since the summer, economists expressed concerns that many remain left out of a recovery.

“It would be no surprise that the beneficiaries of this strong spending are the high-income bracket households,” said S&P Global’s U.S. Chief Economist Beth Ann Bovino. “If a large number of people are unable to participate in the expansion, the economy suffers.”

Earnings reports and guidance from technology companies weighed heavily on stocks Friday.

“Big tech stocks were priced for perfection,” said Michael Mullaney, director of global markets research at Boston Partners. “Any disappointment would be ripe for lower prices. They’re getting slammed today.”

Twitter plunged 20% after posting its slowest user growth in years and warning that uncertainty around the U.S. election could compress ad spending.

Apple shares dropped 5.8% after quarterly iPhone sales fell from a year earlier. That, combined with a delay in the launch of the company’s new smartphone, led to iPhone revenue falling more than analysts had expected.

Shares of Facebook, Amazon.com, Tesla, Microsoft and Netflix all declined more than 1%.

“The big tech earnings were not that bad, but markets did not respond positively, so that does suggest a deeper sense of negativity in the market,” said Seema Shah, chief strategist at Principal Global Investors.

In contrast, shares of Google’s parent Alphabet rose 4.7%. The company reported third-quarter profit that outstripped analyst estimates.

Among other earnings-related moves, shares of Exxon Mobil fell 2.1% after the energy giant reported its third consecutive quarterly loss as the pandemic continued to sap oil demand.

Small stocks, which have outperformed their larger peers this month, also came under pressure. The Russell 2000 dropped 1.5% on Friday, cutting its gains for October to 1.5%.

The prospect of a contested election continues to cast a shadow over the market, adding to the uncertainty over what the rest of the year will bring.

“There’s unprecedented uncertainty around who will be elected and when we will know,” said Adam Grealish, director of investing at Betterment. “We’re using our election systems in ways we’ve never before.”

Some investors have swooped in to take advantage of bargain prices. Ariel Investments has been adding to positions in industrials and media stocks in recent weeks, said Charles Bobrinskoy, vice chairman at the value investment management firm. Ariel sees a major chasm between how smaller value stocks and the broader markets are priced.

The yield on the 10-year Treasury note rose to 0.872% Friday, from 0.834% Thursday.

Overseas, the Stoxx Europe 600 edged up 0.2% after wavering between gains and losses for much of the session.

Europe is once again at the epicenter of the coronavirus pandemic, with the continent now recording more and faster-rising deaths than the U.S. in an abrupt reversal of fortunes. Fresh lockdowns by governments in response to the rising infection levels, led by France and Germany, are weighing on markets.

The rise in infections across parts of Europe is stretching the capacity of hospitals in the worst-hit cities in France, Belgium, Italy and elsewhere. On a per capita basis, deaths from Covid-19 in Europe are now rapidly approaching U.S. levels, after running significantly below since May.

“The sentiment is just so whipsawed at the moment,” said Andy Maynard, managing director of equities sales trading at China Renaissance Securities, citing the uncertainty surrounding U.S. elections and the resurgence of virus infections.

While the election and U.S. stimulus negotiations were a focus for investors, “the bigger risk is actually on global economic recovery and what’s happening to Covid, especially looking at Europe right now,” he added.

In Asia, major markets ended the day sharply lower. South Korea’s Kospi index dropped 2.6%. China’s Shanghai Composite Index fell 1.5%, Hong Kong’s Hang Seng declined 1.9% and Japan’s Nikkei 225 shed 1.5%.

–Xie Yu and Joanne Chiu contributed to this article.

Write to Dawn Lim at dawn.lim@wsj.com

 

(END) Dow Jones Newswires

October 30, 2020 16:20 ET (20:20 GMT)

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