S&P 500 erases 2020 gains, tumbles into correction as economic worries mount
BRYAN R. SMITH/AFP via Getty Images
- US equities declined on Thursday as higher-than-expected jobless claims and renewed virus fears weighed on investors.
- The slide erased year-to-date gains for the S&P 500 and sent the benchmark index into correction territory, implying a 10% decline from recent highs.
- New weekly jobless claims rose to 870,000 in the week ended on Saturday, exceeding the economist estimate of 840,000 compiled by Bloomberg. Claims have lingered near that level since August as the nation's economic rebound has weakened.
- Commentary from Federal Reserve officials on Wednesday afternoon emphasized the need for another fiscal relief package, but Congress has signaled that it won't consider new stimulus until after the November elections.
- Oil slid on the disappointing economic data. West Texas Intermediate crude sank as much as 2.2%, to $39.12 per barrel.
- Watch major indexes update live here.
US stocks dropped on Thursday as investors faced off against revived virus concerns and new signs of pain in the labor market. The slide erased year-to-date gains for the S&P 500 and sent the benchmark index into correction territory, implying a more than 10% decline from recent highs.
New weekly jobless claims unexpectedly jumped to 870,000 in the week ended on Saturday. Economists had expected claims to sink to 840,000. Claims have hovered near this level since August as hiring has slowed and stimulus measures expired.
Continuing claims, which track the aggregate number of Americans receiving unemployment benefits, decreased slightly, to 12.6 million. The reading still exceeded the economist estimate of 12.3 million.
Here's where US indexes stood shortly after the 9:30 a.m. market open on Thursday:
- S&P 500: 3,221.20, down 0.5%
- Dow Jones industrial average: 26,631.39, down 0.5% (132 points)
- Nasdaq composite: 10,591.17, down 0.4%
"The momentum in the labor market is stalling," Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a note. "Against this backdrop, the need for further fiscal action is obvious, but we no longer expect any meaningful relief bill until February."
Federal Reserve officials on Wednesday emphasized the importance of new fiscal aid to keep the US rebound on track. But Congress has largely abandoned talks on another stimulus bill, instead shifting focus to the Supreme Court vacancy and avoiding a government shutdown.
Rising COVID-19 infection rates in the US renewed fears of another virus wave halting economic activity. Case counts began to drop in July but have since swung higher amid reopenings.
Tech mega-caps continued to drop, with Apple, Microsoft, and Facebook dragging on major indexes.
Nikola shares plunged further after Wedbush analysts slapped the stock with its first "sell" rating. The firm cited its founder Trevor Milton's unexpected departure and execution risks for their bearish outlook. Wedbush also lowered its price target for Nikola to $15 from $45, implying a 29% drop over the next 12 months from Wednesday's closing level.
Thursday's decline came after a 525-point drop for the Dow on Wednesday. Fed officials' warnings of a faltering economic bounce-back prompted a late sell-off. Tech giants led the drop and drove the Nasdaq composite to underperform its peers.
Spot gold fell as much as 0.8%, to $1,848.88 per ounce, declining further below its recent support of $1,900. The US dollar rose, and Treasury yields wavered.
Oil futures fell as fears of a weakened recovery bled into the commodity market. West Texas Intermediate crude sank as much as 2.2%, to $39.12 per barrel. Brent crude, oil's international standard, dropped 1.2%, to $41.27 per barrel, at intraday lows.
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