Stocks slump on virus spike before Georgia runoff
Volatility gripped financial markets, spurring a stock sell-off amid concern that a surge in global coronavirus cases could crimp the nascent economic recovery. Traders were also jittery ahead of Tuesday's runoff elections in Georgia, which could determine whether Democrats have control of Congress to push President-elect Joe Biden's agenda.
While equities pared a slide that drove major U.S. benchmarks down more than 2% earlier Monday, the S&P 500 was still on track for its biggest slump in almost 10 weeks. Giants Apple Inc. and Amazon.com Inc. sank at least 2.4%, Boeing Co. weighed on the Dow Jones industrial average after an analyst downgrade, and Tesla Inc. climbed after coming close to meeting its vehicle-deliveries goal. The Cboe Volatility Index -- a gauge of expected price swings for the S&P 500 known as the VIX -- was poised for its biggest surge since September.
Global coronavirus infections topped 85 million, with Prime Minister Boris Johnson imposing a third lockdown across England and Japan considering another state of emergency for the Tokyo area. Daily cases in the U.S. soared to a record of nearly 300,000 following the New Year holiday, and an easier-to-spread variant detected for the first time last week could intensify the surge. Meanwhile, the nonstop political drama of 2020 is bleeding into the first week of 2021 -- with a pivotal election in Georgia, promises of protests in the streets and President Donald Trump's dragged-out fight over the November vote threatening to tear apart the Republican Party.
"Equity markets will remain sensitive to developments tied to the pandemic that have held the U.S. and global economy hostage for nearly a year," John Stoltzfus, chief investment strategist at Oppenheimer, wrote in a note. "A nearer hurdle for the markets to consider will be the outcome of the runoff elections for two seats in the U.S. Senate taking place in Georgia. Should the Democrats win both seats, we expect the S&P 500 to become vulnerable to a downdraft in the neighborhood of 6% to 10%" from the end of 2020.
For Stoltzfus, it appears that equities have priced in a Republican victory in at least one of the two contests tomorrow. He added that "markets prefer that Washington's Capitol Hill have enough checks and balances in place to keep political power out of just one party's hands."
Elsewhere, traders see U.S. inflation averaging at least 2% per year over the coming decade -- the first time expectations have climbed that high since 2018. The move came as real yields plumbed record lows. Bitcoin's rally fizzled out as the famously volatile cryptocurrency sank as much as 17%. Oil dropped as OPEC+ talks were unexpectedly suspended on Monday after a majority of members, including Saudi Arabia, opposed Russia's proposal for a February supply hike.
These are some of the main moves in markets:
Stocks
The S&P 500 decreased 1.5% at 4 p.m.EST.
The Stoxx Europe 600 Index climbed 0.7%.
The MSCI Asia Pacific Index advanced 0.5%.
Currencies
The Bloomberg Dollar Spot Index climbed 0.1%.
The euro increased 0.2% to $1.2244.
The Japanese yen was little changed at 103.17 per dollar.
Bonds
The yield on 10-year Treasurys climbed one basis point to 0.92%.
Germany's 10-year yield declined four basis points to -0.60%.
Britain's 10-year yield decreased two basis points to 0.173%.
Commodities
The Bloomberg Commodity Index advanced 0.7%.
West Texas Intermediate crude fell 2.5% to $47.31 a barrel.
Gold rose 2.4% to $1,943.38 an ounce.
