U.S. stocks were on the back foot at the start of Monday’s session as investors focused on the emergence of a possible fast-spreading variant of the strain of coronavirus that causes COVID-19, overshadowing optimism from the weekend after U.S. lawmakers agreed on a pandemic-relief deal.
On a short Christmas week, investors will also look toward the first day of trade for Tesla Inc. The electric car-maker’s stock, which officially entered the S&P 500 on Friday, accounts for 1% of the broad-market index at its market value of over $600 billion.
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA,
-0.65%fell 302 points, or 1%, to 29,878.
- The S&P 500 SPX,
-1.37%slid 63 points, or 1.7%, to 3,647.
- The Nasdaq Composite COMP,
-1.32%tumbled 212 points, or 1.7%, to 12,543.
On Friday, the stock market closed higher for the week:
- The Dow posted a weekly gain of 0.4%
- The S&P 500 index rose 1.3%
- The Nasdaq closed out the week 3.1% higher
What’s driving the market?
Market participants started Christmas week trade contending with reports from Britain and South Africa of a possible new strain of coronavirus that has so far caused parts of London to implement tighter lockdown and social-distancing procedures. In addition, governments of European Union nations instituted restrictions on inbound flights from the U.K.
The sharp pullback in equities comes even as experts warn against overreacting and note that no evidence indicates that the variant is a more virulent strain of COVID-19, even if it is more contagious.
“Fiscal stimulus is clearly fading as a catalyst, with COVID trends dictating the direction of markets. Risk assets had been shrugging off worsening virus trends, but are now showing some signs of vulnerability – even with the backstop of additional stimulus,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management, in e-mailed comments.
The new concerns about the virus comes ahead of an expected vote on a fiscal spending bill that is paired with fresh aid for out-of-work Americans and businesses that have been devastated by the pandemic.
Over the weekend, Senate Majority Leader Mitch McConnell, R-Ky., said a deal had been reached on an almost $900 billion coronavirus relief package and a vote on the bill is set for later Monday.
“Make no mistake about it, this agreement is far from perfect. But it will deliver emergency relief to a nation in the throes of a genuine emergency,” said Senate Democratic Leader Chuck Schumer.
Peter Cardillo, chief market economist at Spartan Capital Securities said that the “markets decline has [nothing] to do with the long-awaited stimulus package agreement struck by lawmakers, but rather the run-away virus situation in Great Britain and Europe’s new travel restrictions.”
Meanwhile, markets are watching the first trading day for Tesla Inc. TSLA,
Investors saw some second-tier economic data. The Chicago Federal Reserve’s gauge of national economic activity declined to 0.27 in November from 1.01 in October.
Which companies are in focus?
- Shares of Monmouth Real Estate Investment Corp. MNR,
+2.64%rose 3% after investment management firm Blackwells Capital LLC said it made an unsolicited bid to buy Monmouth.
- CVS Health Corp. CVS,
-1.64%said Monday that it will begin COVID-19 vaccinations at long-term health facilities across the country.
- Tesla Inc. shares were down over 4%.
- HMS Holdings Corp. HMSY,
+8.29%gained over 8% after it announced it would be acquired by Gainwell Technologies in a deal valuing the health care services company at about $3.4 billion.
- Lockheed Martin LMT,
-1.48%is buying rocket engine manufacturer Aerojet Rocketdyne Holdings for $4.4 billion. Lockheed’s shares were down 2.2%.
- Financial shares were gaining on Monday after the Federal Reserve authorized banks to resume share buybacks next year. JP Morgan Chase JPM,
+3.72%was up 2.7% and Bank of America Corp. BAC, +2.44%was up 1.7%.
What are other markets doing?
- In Asia, the Shanghai Composite SHCOMP,
+0.76%rose 0.8%, Hong Kong’s Hang Seng Index HSI, -0.72%lost 0.7% and Japan’s Nikkei 225 NIK, -0.18%shed 0.2%.
- In Europe, the Stoxx 600 Europe SXXP,
-2.34%, was 2.8% lower, while London’s FTSE 100 stock index UKX, -1.67%slumped 2.1%.
- The 10-year Treasury note yield TMUBMUSD10Y,
0.925%fell 4.8 basis points to 0.900% as investors turned to safe havens. Yields and prices move in opposite directions.
- Oil futures were lower, with the U.S. benchmark CL.1,
-3.60%down 3.6% on demand worries.
- Gold futures for February delivery GCG21,
-0.37%fell 0.1% as a gauge of the U.S. dollar, the ICE U.S. Dollar Index DXY, +0.38%, rose 0.5% to around 90.421.