ASX set to drop as Wall Street dives on fresh economic fears

The economy is levelling off at about 80 per cent of activity before the pandemic and won’t get back to normal until a vaccine is in place, said Jason Pride, chief investment officer of private wealth at Glenmede in Philadelphia.

“We’re at that phase where it’s harder to get that next bit of the recovery, that next bit of the reopening in place,” Pride said. “We’re still doing it, but the progress is way slower than it was in the first three months of the reopening.”

Investors are struggling to understand where to invest with mega-cap tech stocks overvalued, but the deep-value stocks represent maturing industries, such as energy and brick-an- mortar banks, he said.

The Russell 1000 Growth index was down 2 per cent, compared to a 1.3 per cent decline in the Russell 1000 Value index.

“We’re spending more of our time in that sweet spot in the middle to get away from the extremes of growth,” Pride said.

Federal Reserve Chair Jerome Powell said on Wednesday that the central bank was not planning any “major” changes to its Main Street Lending Program, while saying that both the Fed and Congress need to “stay with it” in working to bolster the economic recovery.

“The longer we go without more stimulus, the harder it will be to sustain the gains in the economy,” said Willie Delwiche, investment strategist at Baird in Milwaukee.

Data from IHS Markit showed gains at factories were offset by a slowdown in the broader services sector in September, suggesting a loss of momentum in the economy at a time when concerns are rising about a potential surge in COVID-19 cases heading into the colder months.

Meanwhile, the US Justice Department unveiled a legislative proposal, which would need congressional approval, that seeks to reform a legal immunity for internet companies and follows through on President Donald Trump’s bid from earlier this year to crack down on tech giants.

Wall Street favourites including Facebook, Apple, Google-parent Alphabet and Amazon.com, which have borne the brunt of recent losses, were down between 1.5 per cent and 3.4 per cent in afternoon trading.

Tesla, another recent Wall Street darling, tumbled 9.3 per cent after chief executive Elon Musk failed to impress with his promise to cut electric vehicle costs at the company’s much-awaited “Battery Day” event on Tuesday.

An index of value-linked stocks such as industrials outperformed growth-oriented sectors, suggesting “investors (are) getting comfortable with the belief that the turnaround story is under way for the economy,” said Lindsey Bell, chief investment strategist at Ally Invest in Charlotte, North Carolina.

Nike Inc surged 8.8 per cent to a record high as its digital sales, especially in North America, helped offset a fall in sales at traditional brick-and-mortar stores.

Declining issues outnumbered advancing ones on the NYSE by a 5.11-to-1 ratio; on Nasdaq, a 4.08-to-1 ratio favoured decliners.

Reuters