U.S. stocks fell in volatile trading on Friday after President Donald Trump’s coronavirus diagnosis fueled concerns about the election and a worsening pandemic.
Major averages clawed back some of the steep losses after House Speaker Nancy Pelosi signaled aid for the airline industry could be coming soon, perhaps even as part of a much-anticipated broad relief bill.
The Dow Jones Industrial Average closed 134.09 points, or 0.5%, lower at 27,682.81 after dropping 430 points at its session low. The S&P 500 slid 1.0%, or 32.36 points, to 3,248.44 after falling as much as 1.7% earlier. The Nasdaq Composite declined 2.2%, or 251.49 points, to 11,075.02.
Shares of airlines jumped higher in unison after Pelosi called on the industry to delay furloughs, saying relief for airline workers is “imminent.” American Airlines and United erased earlier losses and popped 3.3% and 2.4%, respectively.
Weaker-than-expected job growth in September sent a signal that the sharp economic recovery off the coronavirus shutdown may be hitting a wall.
The Labor Department reported Friday that nonfarm payrolls increased by 661,000 in September, held back by declines in government employment and an exodus of workers from the labor force.
In normal times, that type of hiring pace would be considered a sign of a robust job market. The total, in fact, would have been the best month the U.S. had seen since 1983 – if these were normal times and not amid the Covid-19 era that has changed the benchmarks by which economic data is measured.
As it stood, the total was a fairly wide miss from Wall Street’s expectation of 800,000. The unemployment rate fell more than expected to 7.9%, but that was mostly due to a sharp decline in labor force participation.
Taken together, the report is a potential early flare from the business community that a rebound during which 11 million jobs were refilled in four months could be petering out.
“This report is an illusion of progress at a time when we needed accelerating gains in the labor market. The number of jobs added this month is just not enough,” said Nick Bunker, economic research director at job placement site Indeed. “This report is massively concerning. We are not where we need to be, nor are we moving fast enough in the right direction as we head into fall.” Data has looked good, but ...
The timing of the report is inauspicious in that most of the backward-looking economic indicators have been solid.
Housing stands out the most as the residential market is struggling to find supply to meet all the demand. Retail sales have been solid, and manufacturing is back into expansion after heading in the wrong direction for a few months.
The Citi Economic Surprise Index, which measures the data versus Wall Street expectations, has cooled since soaring to its historic peak in mid-July but still is above anything before the pandemic.
Most tellingly, consumer confidence remains strong. But that may not last, particularly if the jobs numbers weaken and the stock market continues to struggle.
“The real question in my mind is why consumers are so upbeat and why they remain upbeat. Until I can answer that, I don’t know how persistent the expansion is going to be,” said Drew Matus, chief market strategist at MetLife Investment Management. “People are underestimating how long the impact of what we’ve been through is going to last. In that regard, there’s some downside risk to the outlook.”
At the moment, the economy remains mostly in a rally mode off the unprecedented slump in the second quarter brought on by the coronavirus-induced shutdown. GDP is projected to increase by as much as a 32% annualized pace in the second quarter after tumbling 31.4% in Q2 and 5% to start the year.
U.S. stocks tumbled on the first trading day of the year, retreating sharply from records set just days ago.
Investors are starting off the new year fixated on the same issue that dominated markets for much of 2020: the coronavirus pandemic. Many believe economic activity will pick up later this year as more of the population is vaccinated and businesses are able to reopen. But they acknowledge the path to recovery will likely be long and uneven.
News on the pandemic front has painted a grim picture in recent days. Hospitalizations in the U.S. jumped to a record Sunday. Meanwhile, governments across Europe are extending lockdowns to try to slow the spread of the virus.
The difficulties that countries face in containing the pandemic mean many companies will remain vulnerable to financial pressures in the near term.
The Dow Jones Industrial Average fell 382.59 points, or 1.3%, to 30223.89. The S&P 500 shed 55.42 points, or 1.5%, to 3700.65 and the Nasdaq Composite declined 189.83 points, or 1.5%, to 12698.45.
"We have continued concerns over Covid-19 and the ability to staunch this wave, not just in the U.S. but globally," said Quincy Krosby, chief market strategist at Prudential Financial.
Ms. Krosby added that there appeared to be growing nervousness over Tuesday's Georgia runoff races, which will determine whether Republicans are able to hold on to control in the Senate. In recent days, betting markets have shown the Republican lead shrinking, pointing to what will likely be a tight race.
"These are all of these concerns, and then we have a market that is priced to perfection, which is denting returns right now," Ms. Krosby said.
Among individual stocks, Coca-Cola shares fell $2.07, or 3.8%, to $52.77. RBC Capital Markets analysts downgraded the stock to "sector perform" from "outperform," saying they believe the pandemic will continue to limit major public events and dining at restaurants, potentially hurting demand for Coca-Cola's products.
Airline stocks, another group that has been hard hit by the pandemic, fell as well, with American Airlines falling 65 cents, or 4.1%, to $15.12 and Delta Air Lines losing $1.48, or 3.7%, to $38.73.
Hotel operators also retreated, with Hilton Worldwide Holdings shedding $3.74, or 3.4%, to $107.52 and Marriott International losing $7.11, or 5.4%, to $124.81.
One stock that bucked the trend Monday: Tesla. The electric-car maker rose $24.10, or 3.4%, to $729.77 after saying it delivered a record 499,550 cars last year, just shy of its half a million target.
As investors broadly withdrew from stocks, gold prices jumped 2.7% to $1,944.70 a troy ounce, posting their biggest one-day percentage gain since April. The precious metal tends to gain favor with investors when market volatility increases.
Overseas, the pan-continental Stoxx Europe 600 rose 0.7%, paring earlier gains.
The U.K.'s FTSE 100 added 1.7%. The trade deal struck on Christmas Eve between the U.K. and the European Union is likely delivering a boost to British stocks, said Sebastian Mackay, a multiasset fund manager at Invesco.
"A lot of the tail risks of a no deal [Brexit] have been removed now. This will lead people to start dipping their toes again in the U.K. market," he said.
Investors also said they were reassured by newly released data on the health of the manufacturing sector. Factories in Asia and Europe increased their output as 2020 drew to a close, according to surveys of purchasing managers that showed strong rises in activity during December.
"We're going through renewed lockdowns, which is curtailing activity to some extent, but what we've seen through the pandemic is that manufacturing activity tends to hold up quite well," Mr. Mackay said.
Most major stock benchmarks in the Asia-Pacific region advanced. South Korea's Kospi Composite led gains, rising 2.5%.
China's Shanghai Composite rose 0.9%, even after a private survey showed China's manufacturing activity moderated in December due to weak demand for the country's exports.
Ben Luk, senior multiasset strategist at State Street Global Markets, said the data pointed to continued fragility in the Chinese economy. But he said that helped ease concerns that China's central bank would act prematurely to tighten monetary policy.
Japan's Nikkei 225 dropped 0.7% after Prime Minister Yoshihide Suga said he might declare a state of emergency in Tokyo and surrounding areas as new coronavirus infections continue to rise.
President-Elect Joe Biden unveiled a $1.9 trillion stimulus package that includes direct payments to Americans, a $15 minimum wage, aid to small businesses, and a national vaccination program, among many other provisions.
The $1.9 trillion legislation includes $1,400 stimulus payments on top of the $600 being distributed, the extension of key unemployment programs that are set to expire in the spring, aid to small businesses, $350 billion to state and local governments, increase in tax credits for low- and middle-income families, and $160 billion for a national program on vaccination and testing.
The $2,000 direct payments would be an increase from the $600 direct payments currently being distributed, meaning eligible Americans would potentially receive an additional $1,400 (as well as an additional $1,400 for each dependent). The legislation would also expand the additional bonus for dependents from each dependent under 17 to each dependent of any age.
The extra weekly amount in unemployment benefits would be increased to $400 a week, up from the current $300 a week. Biden’s plan would also extend those benefits through September — currently, the additional benefit lapses on March 14. Under his plan, Biden would also extend the program that provides jobless benefits to workers who typically don’t qualify for regular benefits.
The number of Americans applying for unemployment benefits rose last week to almost a million people as the latest unemployment figures still remain at levels never seen until the virus struck.
The latest report released by the Labor Department Thursday shows that the number of people filing for jobless benefits increased by 181,000 to a total of 965,000, the most since late August. The previous week showed a slight decrease.
“The rise and level of new unemployment claims is shocking, at the highest point seen since late August,” said Mark Hamrick, senior analyst at Bankrate. “This reminds us that the economic crisis has not gone away, far from it, at a time when multiple crises have been vying for our attention. It hasn’t helped that administration of COVID-19 vaccines has been slow to gather momentum since the pandemic is at the epicenter of the economy’s ills.”
Ms. Murkowski said the second impeachment of Mr. Trump stood “in stark contrast” to the first, which she and virtually every other Republican opposed. She said Mr. Trump had perpetuated “false rhetoric that the election was stolen and rigged” and launched a “pressure campaign against his own vice president, urging him to take actions that he had no authority to do.”
“On the day of the riots, President Trump’s words incited violence, which led to the injury and deaths of Americans — including a Capitol Police officer — the desecration of the Capitol, and briefly interfered with the government’s ability to ensure a peaceful transfer of power,” Ms. Murkowski said.
Her remarks came the day after the House — with support from 10 Republicans — impeached the president on a single charge of “incitement of insurrection,” and as Republicans faced the prospect of a trial that could begin as soon as next week.
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