Wall Street’s late swoon sets up the ASX to open lower

An afternoon slump left stock indexes broadly lower on Wall Street, erasing early gains, as traders worried anew about the rapid spread of the coronavirus in the US.

Stocks were in positive territory for much of the session and small-company stocks were headed for another record high after Pfizer and BioNTech reported updated data suggesting their potential COVID-19 vaccine may be 95 per cent effective. Major indexes turned lower in afternoon trading, and the losses accelerated after New York City said it would close its public schools to in-person learning again as infections continue to rise there.

Wall Street is heading towards record highs.
Wall Street is heading towards record highs. Credit:AP

The S&P 500 lost 1.2 per cent, the Dow Jones slid 1.2 per cent and the Nasdaq composite slipped 0.8 per cent. Futures are pointing to a loss of 19 points, or 0.3 per cent, at the open for the ASX.

Earlier this week, Moderna also gave encouraging early data about a vaccine it’s separately developing. The improved prospects for a vaccine have some investors focusing on next year, when a vaccine or two could have the global economy operating closer to normal again.

Advertisement

That has investors embracing stocks that were beaten down by the weakened, closed economy of the pandemic. United Airlines gained 1.1 per cent for one of the stronger gains in the S&P 500, and American Airlines climbed 0.3 per cent.

“That story seems to be moderating a little bit here as the coronavirus news has now mostly been digested by the marketplace,” said Tom Martin, senior portfolio manager with Globalt Investments. “The vaccine news immediately captures the imagination because you see an endpoint.”

Financial stocks, which stand to gain from a healing economy as workers get jobs and make good on their loans, were up 0.4 per cent for one of the biggest gains among the 11 sectors that make up the S&P 500.

Optimism about the economy’s prospects also has investors less enthusiastic about piling into the companies that dominated the stay-at-home economy of the pandemic, such as Big Tech. Apple slipped 0.2 per cent and Amazon ticked down by 0.6 per cent.

Because these companies are so massive in size, their stock movements have an outsized effect on the S&P 500 and other indexes. Even though it was down just 0.8 per cent, Microsoft was among the heaviest weights in the S&P 500 out of all the stocks within the index.

Of course, many risks still remain for the market. Chief among them is the pandemic, which is accelerating so quickly that governments across the United States and Europe are bringing back varying degrees of restrictions on businesses. Coronavirus counts and hospitalisations are up in states across the country, and health experts are warning about the possibility of a brutal winter.

Even with the encouraging figures from pharmaceutical companies about their potential vaccines, there’s also still no guarantee one will be approved or how long it will take for it to be widely distributed.

Federal Reserve Chair Jerome Powell on Tuesday warned of the potential economic damage in the next few months because of the pandemic. Additional lockdown orders would keep customers away from businesses. But even if the strictest stay-at-home orders don’t return, fear alone of the virus could keep consumers hunkered at home.

Powell and other economists have said another big financial-support program from Congress could help tide the economy over. But bitter partisanship in Washington has prevented any deal to renew extra unemployment benefits for laid-off workers and other stimulus efforts that expired earlier this year.

In Europe, a coronavirus relief package is being held up by a diplomatic dispute between Hungary and Poland and several other major EU countries.

European stock markets rose. France’s CAC 40 and Germany’s DAX returned 0.5 per cent. The FTSE 100 in London added 0.3 per cent.

AP

Market Recap

A concise wrap of the day on the markets, breaking business news and expert opinion delivered to your inbox each afternoon. Sign up for the Herald‘s here and The Age‘s here.

Most Viewed in Business

Source: Thanks smh.com