Stocks slump on lockdown angst amid stimulus limbo
Stocks slumped and Treasurys rallied as a resurgence in coronavirus cases added to concern about tougher restrictions that could slow down the economic recovery without further stimulus.
The S&P 500 sank as much as 1.5% as New York City -- the early epicenter of the pandemic in the U.S. -- prepared for the possibility of closing its schools while Chicago issued an advisory urging residents to avoid leaving home except for work and other essential activities. The Trump administration is stepping back from talks on a relief package and leaving it up to Congress to revive negotiations with House Speaker Nancy Pelosi, according to people familiar with the situation. All major groups in the American equity benchmark fell, led by energy companies, commodity producers and banks. Benchmark 10-year Treasury yields moved away from the cusp of 1%.
Three of the world's top central bankers warned that the prospect of a covid-19 vaccine isn't enough to put an end to the economic challenges created by the pandemic. Coronavirus infections and hospitalizations are rising in 49 U.S. states, compared with a week ago, according to Covid Tracking Project data. Deaths, a lagging indicator, are climbing in 35. And the velocity at which records are being shattered suggests any decline may yet be far off. New York State saw nearly 10,000 new coronavirus cases over two days, as Gov. Andrew Cuomo, D, urged people to "buckle down."
"We're experiencing a bit of exhaustion for the market as we focus on the troubling near-term covid trends and the potential for a few tough months ahead," said Yousef Abbasi, global market strategist at StoneX.
JPMorgan Asset Management is cutting its projections for cross-asset returns over the next decade and signaling more pain for 60/40 allocations that have long formed the bedrock of traditional portfolios. Strategists at the firm reduced their estimate for global equities by 1.4 percentage point to 5.1% a year in the next decade, citing elevated valuations in U.S. large caps. They forecast negative inflation-adjusted returns across almost all sovereign bonds over the next 10 to 15 years, with yields remaining low even after rates normalize.
On the trade front, President Donald Trump signed an order prohibiting U.S. investments in Chinese firms determined to be owned or controlled by the country's military. Relations between the U.S. and China have deteriorated following the signing of a deal early in the year. Trump also repeatedly vowed to punish Beijing over the coronavirus pandemic, its treatment of Muslim minorities and the crackdown on protesters in Hong Kong.
These are some of the main moves in markets:
- The S&P 500 dipped 1% as of 4 p.m. EST.
- The Stoxx Europe 600 Index dipped 0.9%.
- The MSCI Asia Pacific Index rose 0.2%.
- The Bloomberg Dollar Spot Index climbed 0.2%.
- The euro climbed 0.2% to $1.1803.
- The Japanese yen strengthened 0.3% to 105.10 per dollar.
- The yield on 10-year Treasurys declined 10 basis points to 0.88%.
- Germany's 10-year yield sank three basis points to -0.54%.
- Britain's 10-year yield sank seven basis points to 0.348%.
- The Bloomberg Commodity Index fell 0.4%.
- West Texas Intermediate crude dipped 1% to $41.03 a barrel.
- Gold strengthened 0.5% to $1,875.68 an ounce.