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US stocks close down sharply amid rising COVID-19 rates and stimulus impasse

White House economic advisor Larry Kudlow told CNBC that aid talks had slowed down, but noted they are still ongoing

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4:05 pm: US equities see worst day in weeks 

US stocks tanked hard on raising coronavirus (COVID-19) infections and an impasse between Congress and the White House over a new coronavirus stimulus package before the November 3 election. 

The step market decline came as data compiled by Johns Hopkins University showed daily coronavirus cases in the US have risen by an average of 68,767 over the past seven days, a record. 

On the day, the DJIA dropped a whopping 650 points, or 2.29%, to 27,400, its worst day in nearly two months. The S&P 500 declined 1.86% to 3,400 and the tech-heavy Nasdaq dipped 1.64% to 11,358. 

1 pm: US markets take a beating as coronavirus cases climb

The Dow has plummeted more than 830 points, nearly 3%, to 27,505, which would be its worst percentage drop since June 11. The Nasdaq Composite fell 251 points, 2.2%, to 11,299.3, and the S&P 500 declined 83 points, 2.4%, to 3,382.5.

The selloff comes as coronavirus cases are surging. The US has reported an average of 68,767 cases per day over the past week, which is a record.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have yet to reach a coronavirus deal, and optimism an agreement will be reached before the November 3 election is wearing thin. 

Among the biggest laggards was Oracle Corporation (NYSE:ORCL), which lost 3.9% to $57.55.

9:40 am: Wall Street sputters at the start

Despite expectations of a mixed start, the main three indices on Wall Street were all firmly lower at the start of the week’s first trading session.

Shortly after the opening bell, the Dow Jones Industrial Average was down 1.13% at 28,015 while the S&P 500 dropped 0.93% to 3,433 and the Nasdaq fell 0.58% to 11,481.

Any remaining optimism among traders appears to have been snuffed out by a surge in coronavirus (COVID-19) cases in the US as well as the imposition of tougher lockdown restrictions in several European countries as they continue to battle a second wave of the virus.

Meanwhile, ongoing political deadlock over more US government stimulus also has investors firmly in a risk-off mood, while on the macro front a sharp drop in the Chicago Fed’s national activity index for September, which dropped to 0.27 from 1.11 in August, is unlikely to have lifted hopes of an economic recovery.

7.48am: Wall Street to open mostly lower

The rising number of coronavirus cases plus a bump in the road on the way to a US fiscal stimulus package are discouraging US investors on Monday, with the main indices expected to start mostly in the negative.

The Dow Jones Industrial Average is expected to open 281 points lower at 28,054 while the S&P 500 is tipped to open 34 points lower at 3,431; however, in a big week for results from technology stocks, the tech-heavy NASDAQ Composite is expected to advance 52 points to 11,600 when trading starts.

“There are a number of significant earnings reports out this week, but the headlines are likely to be driven by the US Election and the linked stimulus program and the worrying increase in Covid-19 cases across Europe,” said Rony Nehme, the chief market analyst at Squared Financial.

“The ongoing ping pong of fiscal stimulus talks continued with both sides now saying that the other side is moving the goalposts. Pelosi says they have compromised a lot and shows their intent on reaching an agreement. As a result, equities have opened the week on the backfoot as the market awaits a decision.

“Corona cases in Europe are getting very serious with Spain imposing curfews and regional lockdowns as numbers in France are getting out of control with daily cases above 40k. We are now entering the last week before the elections and we could see markets turn very choppy, however, historically stocks always rally before an election so these dips could prove fruitful,” Nehme added.

On the macroeconomic front, the Chicago Fed National Activity Index (CFNAI) is due out today, as are the new home sales data.

“The CFNAI seems to have bounced back faster than the other Fed indices, but perhaps they’re not comparable due to the different units. The CFNAI uses many previously released indicators to gauge overall economic activity and related inflationary pressure on a national basis. A positive number corresponds to growth above trend and a negative number, below trend,” said Marshall Gittler of BDSwiss.

Five things to watch for on Monday:

  • As third quarter earnings season picks up steam, ahead of some big hitters later this week Monday will see results from toy and game giant Hasbro Inc (NASDAQ:HAS) which may attract some investors
  • On the somewhat thin macro calendar, US new home sales will likely be the key event as an indicator of how America’s housing market is coping with the pandemic and a sluggish economy. The data for September is expected to show a 1.3% increase in new home sales
  • Other data in focus will be the Dallas Fed manufacturing index for October, which will provide some insight into how the Texan manufacturing sector is recovering from the initial pandemic shock. The index jumped 5.6 points to 13.6 in September, however, the index is forecast to fall to 9.6 this month
  • Meanwhile, politics will continue to loom large in the background, both in terms of the imminent US election but also continued wrangling over stimulus negotiations in Washington DC, with House of Representatives Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows accusing the other of changing their negotiating requirements
  • There could also be political fireworks as the US Senate prepares to vote on the confirmation of Amy Coney Barratt as a justice of the Supreme Court

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