U.S. stock indexes booked back-to-back losses on Thursday, with investors turning cautious as the resurgence of the COVID-19 pandemic resulted in renewed restrictions on business activity, while the chances of another financial-aid package from Congress appeared to dim.
Labor-market data suggests a slow U.S. recovery remains on track, while Wall Street waits for more news on vaccine development, but Federal Reserve chairman Jerome Powell said a vaccine was not a panacea to the immediate risks facing the economy.
How did stock benchmarks perform?
The Dow Jones Industrial Average DJIA, -1.08% fell 317.46, or 1.1%, ending at 29,080.17; the S&P 500 index SPX, -0.99% declined by 35.65 points to close at 3,537.01, a drop of 1%; the Nasdaq Composite Index COMP, -0.65% fell 76.84 points, or 0.7%, to finish at 11,708.07. Meanwhile, the Russell 2000 closed down 1.6%.
On Wednesday, the Dow ended lower by 23.29 points, or 0.1%, at 29,339.54, snapping a 2-day win streak. The S&P 500 index advanced 27.17 points to close at 3,572.72, notching a gain of 0.8%, its second-highest close ever. The Nasdaq Composite surged 232.57 points, or 2%, to finish at 11,786.43.
What drove the market?
Investors weighed hope for a coronavirus vaccine against the near-term reality of a significant rise in U.S. cases and hospitalizations, which already triggered the return of fresh social-distancing measures in some states and could endanger a tepid economic rebound.
Pfizer PFE, -2.46% and BioNTech BNTX, -7.14% on Monday indicated that a Phase 3 study of an experimental remedy for COVID-19 had 90% efficacy. That was followed up late Wednesday by Moderna Inc. MRNA, which said the first batch of data from its late-stage test of an experimental COVID-19 vaccine was ready for analysis. Moderna’s shares rose 6.5%.
However, The Wall Street Journal, citing the Covid Tracking project, reported that new U.S. cases and hospitalizations both set records, respectively topping 144,000 and 65,000 on Wednesday. In the past week, the U.S. has averaged 128,081 cases a day, up an alarming 69% from the average two weeks ago and cases are rising in 49 states and territories.
“The virus clearly exists, that’s fair to say. We’re seeing countries go into lockdown mode and you’re beginning to wonder how many U.S. cities will shut down. The market’s being cautious,” said Kenny Polcari, managing partner at Kace Capital Advisors, in an interview.
The resurgence of the pandemic has prompted a number of states to reimpose restrictions on consumer and business activity. New York Gov. Andrew Cuomo ordered bars, restaurants and gyms in New York state to close at 10 p.m. starting Friday, while Chicago’s mayor advised people to stay at home or work from home for 30 days from Monday, apart from essential travel and business.
Meanwhile, another financial relief package to help American businesses during the epidemic looks doubtful anytime soon, given that the Trump administration is stepping back from negotiations and leaving Senate Majority Leader Mitch McConnell to revive talks with House Speaker Nancy Pelosi.
The darkening economic backdrop had so-called value companies lead Thursday’s market decline, after their prospects briefly brighten following Pfizer’s vaccine announcement. Still, some money managers say that having a clear path to the pandemic’s end will allow the most beaten-down shares this year to outperform shares of fast-growing companies.
“We are moving towards more lockdowns. That’s going to negatively affect the economy in the next three to six months. But if there are more signs the vaccine trials are successful, then that could spur another rotation to value,” Alessio De Longis, senior portfolio manager at Invesco, told MarketWatch.
In economic reports, U.S. jobless benefit claims fell 48,000 to 709,000 in early November, and continuing jobless claims in states dropped 436,000 to 6.79 million.
A measure of the annual rate of U.S. inflation, the consumer-price index, rose 1.2% in October, down from 1.4% in the prior month. Core CPI, excluding volatile food and energy prices, also retreated, rising 1.6%, down from 1.7% in the prior period.
At an ECB panel, Fed Chairman Powell on Thursday said the development of an effective COVID-19 vaccine was good news, but not an immediate panacea for the economy and “significant challenges and uncertainties remain about timing production, distribution, and efficacy for different groups .”
Which stocks were in focus?
- J.C. Penney Co. Inc. JCPNQ, +34.91% said Thursday that it has launched a new women’s brand, Stylus, that offers comfortable clothing, like jumpsuits and T-shirts, in sizes ranging from XS to 3X. Shares of the bankrupt company rose 33.4%.
- Walmart Inc. WMT, +0.16% announced the expansion of its pet care services on Thursday to include dog walking and pet sitting through Rover, a website and app that in the U.S. offers 300,000 service providers. Shares gained 0.2%.
- Shares of Energizer Holdings Inc. ENR, -14.79% dropped 14.8% Thursday, after the battery maker reported a fiscal fourth-quarter profit that fell short of expectations, while revenue rose above forecasts.
- Southwest Airlines Co. LUV, -3.00% reported October operational data that was at the better part of previously provided guidance ranges, while providing a somewhat downbeat outlook for the rest of the year. Its stock shed 3%.
- Shares of XPeng Inc. XPEV, +33.40% shot up 33.4% Thursday, after the China-based electric-vehicle maker reported a third-quarter loss that widened from a year ago, but revenue that jumped more than fourfold as deliveries soared 266%.
How did other markets fare?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, 0.884% TMUBMUSD10Y, 0.884% retreated 10.2 basis points to 0.885% on Thursday. The bond market was closed in observance of Veterans Day on Wednesday. Yields and bond prices move in opposite directions.
Oil futures fell, with the U.S. benchmark CL.1, -1.18%, losing 33 cents, or 0.8% to settle at $41.12 per barrel. Gold prices finished higher, with the December contract GCZ20, +0.72% climbing by $11.70, or 0.6%, to settle at $1,873.30 an ounce.
The ICE U.S. Dollar Index DXY, -0.07%, a measure of the currency against a basket of six major rivals, was down less than 0.1%.
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