US stocks finish worst week and month since March
PHOTO: REUTERS
Wall Street suffered its worst week and month since March on Friday with another losing session as markets gird for the US elections amid worries over rising coronavirus cases.
Major US equities indices were in the red the entire session as both Europe and the United States passed grim new milestones on Covid-19 and Belgium became the latest European country to tighten restrictions following announcements earlier in the week by France and Germany.
Although some US economic data has been stronger of late, including a record jump in third-quarter growth released Thursday, investors are concerned about new spikes in daily coronavirus cases that have begun to strain hospitals in some parts of the country.
The United States has seen a resurgence of its Covid-19 outbreak since mid-October, and has now charted more than nine million cases, according to a tally from Johns Hopkins University.
The jump in cases has clouded the growth outlook amid fears of more US restrictions, said Briefing.com analyst Patrick O’Hare, who noted that many companies did not offer profit forecasts in earnings releases the last couple of weeks.
“These companies can’t really get their mind around demand to provide earnings forecast, so they’re not offering it,” he said.
And O’Hare noted that markets have been in “de-risking” mode all week, in part because some polls have shown key states tightening in the US presidential contest, raising the odds of a contested election.
Further denting the outlook has been the failure of Congress to enact another round of US stimulus.
By one measure, the market’s latest pullback could mean trouble for US President Donald Trump.
The week’s drop of 5.6% in the broad-based S&P 500 means that closely-watched indicator lost 0.6% from July 31 and October 31.
The S&P’s performance in this period prior to an election historically has been an indicator of whether the incumbent party will retain control of the White House, according to Sam Stovall, chief investment analyst at CFRA Research.
The decline “implies, but does not guarantee” a victory by Democratic candidate Joe Biden on Tuesday, Stovall said.
The last time the indicator - which rewards the incumbent’s party when stocks rise during this period - proved wrong was 1980, when President Jimmy Carter was defeated by Ronald Reagan despite a rise in stocks.
Earlier Friday, European stocks were mixed after data showed a big uptick in third-quarter activity. Eurozone output soared by a record 12.7% in the third quarter as the bloc bounced back from the depths of the coronavirus lockdown, official data showed Friday.
But despite the rebound, total gross domestic product in the 19-country zone is still 4.3% lower than the third quarter of 2019.
London closed the day down marginally while Frankfurt shed 0.4%. Paris bucked the trend to add 0.5%. “Growth data for the third quarter have impressed today, with Spanish, German, French, and eurozone readings all coming in above market estimates,” said Joshua Mahony, analyst at IG trading group.
“However, it comes as no surprise to see markets fail to post a proportionate rally (due to) fears of a double-dip recession.”
Published in The Express Tribune, November 1st, 2020.
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