/Dow futures drop nearly 500 points as COVID cases rise – MarketWatch

Dow futures drop nearly 500 points as COVID cases rise – MarketWatch


Stocks fell hard Wednesday morning as a continued rise in COVID-19 cases in the U.S. and Europe heightened investor worries over the economic recovery.

The Dow Jones Industrial Average
DJIA,
-2.09%

slid 539 points, or 2%, to open near 26,924, while the S&P 500
SPX,
-2.14%

dropped 65 points, or 1.9%, to 3,326. The Nasdaq Composite fell 215points, or 1.9%, to 11,216.

The losses come after the Dow on Tuesday fell 222.19 points, or 0.8%, to end at 27,463.19, while the S&P 500 fell 0.29 point, or 0.3%, to finish at 3,390.68. The Nasdaq Composite bucked the weaker trend to rise 72.41 points, or 0.6%, to close at 11,431.35.

What’s driving the market?

Stocks have been under pressure this week as Germany and France weighed further restrictions on business activity in an effort to contain the rise in COVID-19 cases and the U.S. saw the number of new cases hit records.

The number of new U.S. cases daily rose back above 70,000 on Tuesday after hitting a record above 80,000 at the end of last week. The U.S. has reported a record 500,000 cases over the past week, the New York Times reported, while the seven-day average of confirmed new cases hit a record of 69,967 on Monday, according to a Wall Street Journal analysis of data from Johns Hopkins University.

“In 36 states, the hospitalization rate for the coronavirus increased by at least 5% over in the past seven days,” said David Madden, market analyst at CMC Markets. “Traders keep an eye on the hospitalization rates because the authorities want to ensure the health care services aren’t overwhelmed — that can often be a trigger to bringing in tougher restrictions.”

Jitters ahead of the Nov. 3 presidential election, now less than a week away, were also contributing to volatility, analysts said. Democratic challenger Joe Biden has maintained a lead over President Donald Trump in the polls, but the race has tightened. An unclear or contested election result would be a potential worst-case scenario, analysts said.

Meanwhile, the chief executives of Alphabet Inc.’s
GOOG,
-4.10%

GOOGL,
-4.20%

Google, Facebook Inc.
FB,
-3.68%
,
and Twitter Inc.
TWTR,
-4.78%

will appear before a Senate Commerce subcommittee hearing titled, “Does Section 230’s Sweeping Immunity Enable Big Tech Bad Behavior?”

See: Ready for another Big Tech hearing/earnings double-header?

Investors also continue to wade through the busiest week of the earnings reporting season, including better-than-expected results late Tuesday from software giant Microsoft Corp.
MSFT,
-3.70%
,
though the company’s forecast came in shy of estimates. Shares were down 2.9% in early trade.

The recent pullback “does reflect weakened short-term momentum,” said Katie Stockton, market technician and founder of Fairlead Strategies, but as of Wednesday, the market had generated its first “oversold” reading since the late September low, Stockton told MarketWatch. The key level she’s keeping an eye on is 3,357 for the S&P 500 index.

In the longer term, an uptrend is still intact, Stockton said. There’s more breadth in the market, for one thing. And some of the scarier-seeming gauges, like a spike in the VIX
VIX,
+12.32%
,
which is up 33% this week, really just reflect sentiment, she thinks. “That should give peace of mind to some folks that perhaps a day like today is not the best day to run out and sell everything. Don’t panic. Let the market settle in and show us where it’s going to close.”

Stockton also believes the week’s earnings reports from FANMAG companies could help the market pull through this rough patch. “If their earnings are well received that could be a catalyst to get the major indices out of their slump.”

On Wednesday, the government said the trade deficit narrowed to $79.4 billion in September. Economists surveyed by MarketWatch had forecast it would widen to $83.5 billion from $82.9 billion a month earlier.

Which companies are in focus?
How are other markets trading?

In global equities, the Shanghai Composite
SHCOMP,
+0.45%

 closed 0.5% higher, while Hong Kong’s Hang Seng Index
HSI,
-0.31%

 and Japan’s Nikkei 225 Index
NIK,
-0.28%

 both declined 0.3%. The pan-European Stoxx 600 Europe
SXXP,
-2.63%

  traded 2.9% lower, while London’s FTSE 100
UKX,
-2.26%

 slid 2.2%.

Oil futures sank, with the U.S. benchmark
CL00,
-5.08%

 down 4.7%, to trade near at $37.70 a barrel as rising coronavirus cases dented expectations for demand. Gold futures
GCZ20,
-1.73%

  were down 1.6%, at $ 1,881.20 an ounce, as the dollar gained.

The ICE U.S. Dollar Index
DXY,
+0.59%

 a measure of the currency against a basket of six major rivals, was up 0.7%.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
0.756%

was 2 basis points lower at 0.756%, as traders piled into assets perceived as safer. Yields and bond prices move in opposite directions.

Read next: Something good in 2020? The ‘January effect’ may come early, these strategists say

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