Dow drops more than 600 points as September sell-off continues

Stocks fell sharply on Monday as fears about the potential worsening of the coronavirus pandemic, as well as uncertainty on further U.S. fiscal stimulus, rattled traders.

The Dow Jones Industrial Average dropped 658 points, or 2.4%. The S&P 500 lost 1.8% while the Nasdaq Composite fell 0.9%. Monday’s decline put the Dow on pace for its worst day since Sept. 3. The S&P 500 was headed for its biggest one-day sell-off since Sept. 10.

These declines added to what has been a downbeat month on Wall Street. The S&P 500 is down more than 6% in September and the Dow has lost 4.9%. The Nasdaq Composite has tumbled 9.1% month to date and has reentered correction territory. The tech-heavy composite is now down more than 11% from its all-time high set on Sept. 2. The S&P 500, meanwhile, fell back towards the flatline for 2020.

Concerns over another wave of coronavirus cases came as the U.K. reportedly considers another national lockdown to stop an increase in infections. Top U.K. government scientists said that, without further action, the country’s infection rate could reach 50,000 per day. The country’s benchmark FTSE 100 dropped more than 3% on the fear. Here in the U.S., stocks that would be hit hardest from another lockdown declined. Shares of Carnival Corp. were off by 6.4%. Southwest Airlines and Delta Air Lines fell 5.6% and 8.7%, respectively. 

“This is a health-care issue and we still really haven’t made any progress,” said Brad Kinkelaar, global portfolio manager at Barrow Hanley. “We still don’t have a vaccine; obviously, there’s still no cure and we’re still figuring out how to deal with the crisis.”

“So it’s not surprising we’ve gone from a market that was essentially pricing in a resumption of normal activity, within a reasonable time frame, to one pricing in the notion that we haven’t figured this out yet,” Kinkelaar said. 

In Washington, negotiations for a new coronavirus stimulus bill could become more complicated after the passing of Supreme Court Justice Ruth Bader Ginsburg, which could lead to a bitter nomination process ahead of the election. Trump said he would nominate someone this week to take Ginsburg’s seat. Republicans and Democrats have been in a stalemate since July after provisions from the previous stimulus bill expired.

Chris Krueger, Washington strategist at Cowen, said in a note that a new coronavirus stimulus bill is now “unlikely until post-Nov. 3 as the fight over Justice Ginsburg’s empty seat will consume D.C.”

Technology shares — which led the broader market off its coronavirus lows and into record territory, but have been hit hard so far in September — struggled once again. Facebook and Amazon each dropped more than 1%. Alphabet slid 1.6%.

“For the market to hold these levels buyers have to come into the technology sector over the next week to 10 days,” said Marc Chaikin, CEO of Chaikin Analytics, in a post. “Without the impetus of the call option buyers who helped propel the large-cap tech stocks to extreme valuations, it is unlikely that the subsequent rally can exceed the September peak.”

Bank stocks also contributed to the broader market drop after a report found that a number of global banks moved allegedly illicit funds. Shares of Deutsche Bank dropped 8.5%, while JPMorgan Chase fell 3.3%.

Meanwhile, tensions between the U.S. and China keep escalating. China’s Ministry of Commerce released long-awaited provisions on its so-called “unreliable entity list,” a day after the U.S. announced a ban on WeChat and TikTok.

Shares of General Motors fell 4.6% after Nikola founder Trevor Milton resigned from his post of executive chairman. Milton’s departure — which sent Nikola shares down 19.3% on Monday — comes after the two companies announced a partnership earlier this month. 

The S&P 500, Dow Jones Industrial Average and Nasdaq Composite were coming off their third straight weekly drop, marking their longest weekly slide since 2019. 

— CNBC’s Yun Li contributed reporting.

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