Stocks ended sharply lower on Thursday as growing concerns of restrictions on business activity owing to the resurgence of coronavirus cases created panic among investors, while there is yet no assurance on another round of stimulus from Congress. Data from the Labor Department showed a decline in jobless claims, reflecting that the economy is on track for steady recovery. However, there is still a long way to go. All three major indexes ended the day in red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) shed 1.1% or 317.46 points to finish at 29,080.17 and declining for the second straight day in a row. The blue-chip index was dragged down by financial and industrial stocks that are sensitive to economic growth.
The S&P 500 fell 1% or 35.65 points end the day. All the 11 sectors of the benchmark index closed in negative zone. The Energy Select Sector SPDR (XLE) and Materials Select Sector SPDR (XLB) were the biggest losers, declining 3.2% and 2.1%, respectively. Airline and cruise operators, who were one of the biggest casualties of the pandemic, once again took a hit. Shares of Southwest Airlines Co. LUV declined 3%, while Royal Caribbean Group (RCL – Free Report) fell 3.9%. Southwest Airlines has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq declined 0.7% or 76.84 points to close at 11,708.07.
The fear-gauge CBOE Volatility Index (VIX) was up 8.1% to 25.35. A total of 10.3 billion shares were traded on Thursday, higher than the last 20-session average of 10 billion. Decliners outnumbered advancers on the NYSE by a 2.95-to-1 ratio. On Nasdaq, a 2.17-to-1 ratio favored decliners issues.
Coronavirus Fears Take a Toll on Stocks
Escalating cases of coronavirus infections coupled with hospitalizations once again raised panic in the minds of investors as these could lead states imposing restrictions on business activity. This could further hamper the pace of economic recovery.
Stocks had rallied on Monday after Pfizer, Inc. PFE announced that its vaccine candidate showed 90% success in its final-stage trail. This saw reopening stocks bouncing back but the rally gradually came to a halt as coronavirus cases continue to rise, leading investors to weigh on the timeline of a vaccine.
Fed Paints Bleak Economic Outlook
Stocks took a further beating on Thursday after Federal Reserve Chairman Jerome Powell said that despite positive news on the coronavirus vaccine front earlier this week, uncertainty remains on the economic outlook of the country.
Powell said that it is still too early to “assess with any confidence” the path to economic recovery in the near term despite the good news on the vaccine. He also warned that the next few months could be challenging with the virus spreading at a fast rate once again.
Uncertainty Over Stimulus
Investors, who had been banking on the news of another round of stimulus in the offing, now are slowing losing hope, as chances now appear bleak. In fact, chances are that another round of financial-aid package may not get passed by Congress until this year end, which has once again dampened the spirit of investors.
The Labor Department said on Thursday that initial weekly jobless claims dropped by 48,000 to 709,000, hitting a seven-month low. This also marks the fourth consecutive week of decline in jobless claims. Continuing jobless claims declined by 436,000 to 6.79 million.
Besides, the consumer price index that measures the annual inflation rate of the country advanced 1.2% in October, down 1.4% from the last month. Core CPI for all items excluding food and energy rose 1.6%, after rising 1.7% in September. The Consumer Price Index remained unchanged in October after rising 0.2% in October.
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