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Business & Technology

Dow and S&P 500 Fall Further After 650-Point Dive on Monday

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Dow and S&P 500 Fall Further After 650-Point Dive on Monday

2020-10-27 21:17:35

By Laura Tucker, Staff writer; Image: Stock trading (Image source: Public domain)

It's not good news for the economy, and one week away from the election, that means it's not good for Donald Trump, either. With new coronavirus cases hitting record numbers and no hope for a stimulus relief package to be approved before the election, it sent stocks tumbling.

The seven-day average of new virus cases in the United States hit a record high on Monday, while countries in Europe were shoring up restrictions to hopefully control the spread.

In the past, evidence that part of the economy had started to recover from the virus-related disruptions and shutdowns made stocks bounce back in the past.

On Monday, the Dow Jones fell 650 points, or 2.3 percent, to hit 27,686. The S&P 500 stock index fell a little less, about 1.9 percent, to hit 3.401. The Nasdaq composite index was down 1.6 percent to end up at 11,359. This eliminated all of the blue-chip indexes gains for the month.

On Tuesday the Dow fell 22.10 points, or 0.8 percent, to hit 27.463. It was down four of the past five trading days. Blue chips are down 3.8 percent for the year. The S&P 500 lost another 10.29 points, or 0.3 percent, to hit 3390.68. The Nasdaq came back up 72.41 points, or 0.6 percent, to hit 11431.35.

Despite the pandemic-related worries throughout, technology stocks were helped along by Advanced Micro Devices' planned acquisition of Xilinx, another chip maker. These shares were up $9.80, or 8.6 percent, to end at $124.35. AMD was down $3.35, or 4.1 percent,  to end at $78.88.

It was the tech industry that had a good day on Tuesday. Microsoft, after the closing bell, reported higher sales brought on by the demand for cloud-computing services in the pandemic. Shares rose 0.3 percent after hours. Apple, Amazon.com, and other tech companies will report in later this week.

Asia saw mild declines in most major equity benchmarks. Hong Kong's hang Seng Index dropped 0.5 percent, and Japan's Nikkei 225 didn't show much change. The Shanghai Composite Index crawled upward 0.1 percent.

The economy has taken quite a hit because of the pandemic. Businesses closed, workers were either working at home or laid off. The hospitality and travel industries have taken a hit. Restaurants and bars have either been shut down or limited in their serving, Cruises have been frozen, and airlines and hotels are at much less of a capacity.

Unemployment has recovered some, but there are many workers who haven't been employed for seven months.

Help was sent through a few stimulus packages. Americans were given $1200 apiece to help, and the jobless received $600 extra weekly  until the money ran out.. There were also provisions for businesses small and large.

The Democrats have tried to get an agreement for another relief bill, but they can't come to an agreement with Senate Republicans and the White House, with everyone blaming each other.

This also has much to do with why the market took a dip on Monday and Tuesday — the failure to reach a deal.

"Financial markets are getting a reality check, as investors come to terms with the failure of Congress to agree to a pre-election stimulus package and surging COVID-19 cases," Craig Erlam, an analyst with OANDA, wrote in a commentary on Monday. "Just over a week to go until the U.S. election, it was always likely we would see a little more risk aversion this week given the level of uncertainty."

Ryan Detrick, chief market strategist with LPL Financial, agreed. "The double whammy of a stalled stimulus bill and new highs in cases is a harsh reminder of the many worries that are still out there," he said. "Most of the recent economic data has bene strong, but when you see parts of Europe going back to rolling shutdowns, it reminds us the fight is still far from over." 

"Ultimately," opined Nicole Tanenbaum, partner and chief investment strategist at Chequers Financial Management, "until the underlying health-care issue truly begins to resolve, we should expect a cloud to continue to hang over the global economic outlook and the markets to continue their choppy path."

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