Stocks fall again as a wild trading week continues
Technology and energy stocks led a broad sell-off Thursday on Wall Street that wiped out nearly all of the market’s gains from a strong rally the day before.
The Standard & Poor’s 500 index ended down 1.8% after having been up 0.8% in the early going. The slide cut deeply into the 2% gain that the benchmark index posted Wednesday. The latest gyrations follow a wild stretch in which the S&P 500 careened from its worst three-day slump since June to its best day in nearly three months.
Tech stocks accounted for the biggest share of the broad sell-off. The sector has been at the center of the market’s swings, hurt by criticism that its recession-defying surge in recent months was overdone. The tech-heavy Nasdaq composite index slumped 10% from last Thursday through Tuesday and then climbed 2.7% on Wednesday. It lost most of that ground Thursday, falling 2% after shedding an early gain.
Healthcare stocks and companies that rely on consumer spending also took hefty losses. Energy companies fell the most as the price of U.S. crude oil dropped 2%. Treasury yields also fell, a sign of caution in the market. The price of gold rose 0.5%.
The market probably will lack any solid direction for the next few months as investors weigh several key issues, said Rod von Lipsey, managing director at UBS Private Wealth Management.
“Two things everybody is waiting for: Who is going to win the election, and are we going to find a vaccine for the virus?” he said. “Those two questions are impossible for us to answer in this particular quarter.”
The S&P 500 fell 59.77 points to 3,339.19, its fourth decline in five days. The index is on pace for its second straight weekly loss. The Dow Jones industrial average declined 405.89 points, or 1.5%, to 27,534.58. The Nasdaq lost 221.97 points, closing at 10,919.59. The Russell 2000 index of smaller-company stocks fell 18.73 points, or 1.2%, to 1,507.75.
Thursday’s selling followed a batch of new economic data on jobs and wholesale prices. The government said 884,000 workers applied for unemployment benefits last week. The number was flat from last week’s upwardly revised number, and it’s the lowest it has been since the pandemic caused the number of layoffs to begin soaring in March. But the tally was still higher than economists expected, and it’s an indication that layoffs remain stuck at a discouragingly high level. Economists called the report disappointing.
A separate report showed that inflation remains very weak at the wholesale level, though it was stronger last month than economists had forecast. The Federal Reserve has said that it’s willing to allow inflation to run higher than its target level before raising interest rates, if inflation had been too low before that. That’s key for investors because low interest rates can boost stock prices.
Von Lipsey said big investors are either waiting on the sidelines or in a neutral position on expectations that markets will stay volatile through the uncertainty.
Treasury yields initially held up after the release of the economic reports, then turned lower. The yield on the 10-year note fell to 0.68% from Wednesday’s 0.70%.
The market’s focus continues to be on big technology stocks, in large part because they’ve grown so big that their movements can move broad market indexes almost by themselves. Apple, Microsoft, Amazon, Facebook and Alphabet, Google’s parent company, account for 23% of the S&P 500.
Many analysts say tech stocks’ recent tumult isn’t that surprising given how high they had soared. Apple more than doubled in less than five months through the pandemic, Tesla surged 74.1% last month alone, and earlier this month Zoom Video Communications was up nearly 573% for 2020.
While Big Tech is indeed benefiting from the shift to online life that the pandemic and ensuing stay-at-home economy has accelerated, critics said their stocks prices shot too high. This last week’s sell-off blew off some of that steam, but analysts wonder how much selling is left in the pipeline.
Apple rose as much as 2.7% on Thursday morning, but then lost its gains and closed down 3.3%. Tesla rose 1.4%. Zoom slid 1.3%.
The selling comes as the odds grow longer that Congress will be able to deliver more aid to the economy before November’s elections — aid that many investors say is crucial after federal unemployment benefits and other stimulus expired. Partisan disagreements have kept Congress at a seeming impasse. On Thursday, Democrats blocked a Republican bill that they said shortchanged pressing national needs. It’s unclear whether bipartisan talks on a bill will resume.
Quest Diagnostics rose 3.2% after it raised its forecasts for sales and profit this year. Energy producers were among the biggest decliners. Occidental Petroleum fell 7.9%, and Devon Energy dropped 7.4%.