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Stocks around the world slump as virus mutation hits economy

5 months 3 weeks 5 days ago Monday, December 21 2020 Dec 21, 2020 December 21, 2020 10:46 AM December 21, 2020 in News
Source: Associated Press
Exterior view of the New York Stock Exchange on Manhattan's Wall Street.

NEW YORK (AP) — Stocks are slumping Monday as a new, potentially more infectious strain of the coronavirus has countries around the world restricting travel from the United Kingdom, raising worries that the economy is about to take even worse punishment.

The S&P 500 was 1.9% lower in morning trading, putting it on track to fall for a second day from its record set on Thursday. The Dow Jones Industrial Average was down 379 points, or 1.3%, at 29,799, as of 10:23 a.m. Eastern time, and the Nasdaq composite was 1.7% lower.

It’s a busy day of trading, with plenty of forces pushing and pulling the market. Thin trading ahead of a holiday-shortened week may also be exacerbating moves, analysts said. Crude oil prices were dropping amid worries about travel being curtailed around the world, and Treasury yields slipped.

One big factor for the market is Congress, which finally appears set to act on a $900 billion relief effort for the economy. House and Senate leaders are planning votes on the deal Monday, which would include $600 in cash payments sent to most Americans, extra benefits for laid-off workers and other financial support.

Economists and investors have been clamoring for such aid for months, and a recent upswing in momentum for talks had stock prices rising in anticipation of a deal. Analysts said some traders may be selling now to lock in profits, with the compromise all but assured and prices close to the highest they’ve ever been. Even after Monday’s drop, the S&P 500 is back only to where it was earlier this month.

Across the Atlantic, negotiators blew past a Sunday deadline set for talks on trade terms for the United Kingdom’s exit from the European Union. Investors have been fixed on the progress of those talks because a Brexit with no deal could cause massive disruptions for businesses on New Year’s Day.

Monday is also the first day of trading for Tesla since joining the S&P 500 index. The electric-vehicle maker surged so much this year, nearly 731% as of Friday evening, that some critics say its price doesn’t make sense. But its inclusion in the benchmark index triggered $90.3 billion in trades, as the company instantly became the sixth-biggest in the S&P 500. Tesla slumped 5.2% Monday.

The market’s focus, though, was centered nearly 3,500 miles to the east of Wall Street, where U.K. Prime Minister Boris Johnson said Saturday that he was placing London and the southeast of England in a new level of restrictions after scientific advisers warned they detected a new variant of the coronavirus. There is no evidence that the new strain’s mutations make it more deadly, but it seems to infect more easily than others.

Two COVID-19 vaccines have already been approved for the United States, and regulators around the world have also either approved or are considering usage of the vaccines. Hope that widespread vaccinations will nurse the economy back to some semblance of normal has been a big reason for surging prices across markets worldwide.

But for now, vaccinations are only for health care workers and other high-risk populations. It will be a while before a more widespread rollout can get life around the world closer to normal, and surging numbers of coronavirus counts and deaths in the meanwhile are setting the global economy up for a bleak few months.

The worries hit stock markets hardest in Europe, where France banned U.K. trucks from entering for a period of 48 hours. Other countries around the world also halted flights from the United Kingdom.

France’s CAC 40 fell 3.1%, and Germany’s DAX lost 3.3%. The FTSE 100 in London dropped 2.4%.

On Wall Street, stocks of energy producers had the sharpest losses on worries that travel restrictions will mean even fewer airplane seats filled and fewer miles driven by automobiles. Diamondback Energy dropped 6.5% and Occidental Petroleum fell 5.2%.

Travel-related companies were also hit hard. Cruise operator Carnival lost 6.1%, and American Airlines fell 3.5%.

Losses were widespread, and nearly 95% of the stocks in the S&P 500 were dropping. Amid the few gainers was Nike, which rose 5.3% after reporting stronger revenue and profit for its latest quarter than analysts expected.

Financial stocks were also a rare source of resilience, after the Federal Reserve said Friday that the 33 largest banks look to have healthy enough reserves to survive another sharp downturn. The Fed also permitted buybacks of company stock, with some limits.

Goldman Sachs rose 5.8% after it said it expects to begin buying back its stock agiin next quarter.

In Asian stock markets, Tokyo’s Nikkei 225 lost 0.2% after Japan’s Cabinet approved a record annual budget of 106.6 trillion yen ($1.03 trillion) for the coming fiscal year, which begins April 1.

Hong Kong’s Hang Seng declined 0.7%, South Korea’s Kospi recovered from early losses to gain 0.2% and stocks in Shanghai rose 0.8%.

The yield on the 10-year Treasury slipped to 0.92% from 0.93% late Friday.

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