European markets staggered too as France and Germany signaled plans to implement new social restrictions to contain a surge of covid-19 cases. The German DAX fell 4.1 percent, France’s CAC slid 3.4 percent, and the Pan-European Stoxx gave up nearly 3 percent, all three plunging to levels not seen since late May.
Investors have signaled increasing concerns as the pandemic enters this newest phase, which coincides with flu season. The rolling seven-day average of new daily case counts in the United States hit a record 70,000 on Tuesday, and coronavirus-related hospitalizations shot up nearly 10 percent in the last week. Another 73,627 cases were reported in the United States on Tuesday.
“Although statistically the start of one of the strongest periods for markets, covid-19 once again flips the narrative,” said Jamie Cox, managing partner for Harris Financial Group. “The country is under significant stress, and the markets continue to reflect that reality. Thankfully, November has the potential to settle some big, outstanding issues.”
Failed efforts to advance a coronavirus aid package also weighed on investors. Though House Speaker Nancy Pelosi (D-Calif.) suggested last week the possibility of a breakthrough on an estimated $2 trillion deal, the Republican-controlled Senate has since adjourned until Nov. 9. The recess ensures that a deal to pump hundreds of billions of dollars into the economy, with aid delivered to struggling households and floundering small businesses, would not arrive before the election.
Uncertainty over the timing of coronavirus relief is further complicated by the election, which may change the power dynamics in Washington. Senate Republicans have rejected provisions for a larger stimulus package even as President Trump has publicly called for greater spending.
The House passed a $3.4 trillion bill called the Heroes Act in May, but Senate Republicans and the White House dismissed it as overly costly, objecting to nearly $1 trillion for state and local governments. Pelosi subsequently scaled back the bill to $2.2 trillion, largely by shortening the time frame of the initiatives, reducing the state and local aid portion to $436 billion. Republicans still say it’s too high, but the House passed the $2.2 trillion version earlier this month, over GOP opposition.
Heavy stock market losses connected to the virus are also muddling Trump’s closing argument to voters. The president has often linked Wall Street’s performance to his own leadership and has framed an economic comeback as central to his reelection. But worries of a prolonged downturn reflected in retreating stock prices challenge the president’s message to the electorate.
In two crucial Midwest battleground states, former vice president Joe Biden continues to hold a lead over Trump, according to a new pair of Washington Post-ABC News polls. In Michigan, Biden is ahead among likely voters by 51 percent to 44 percent. In Wisconsin, Biden claims a bigger advantage, with likely voters favoring him 57 percent to 40 percent. Registered voters in both states say they trust Biden more to handle the novel coronavirus by double-digit margins.
Rising case numbers and hospitalizations have prompted fears not just tied to public health but of the follow-on economic repercussions if local governments are compelled to reinstitute business closures and stay-at-home measures. During the spring months, 42 states and territories in the U.S. issued mandatory orders restricting movement, according to the Centers for Disease Control and Prevention, affecting 73 percent of all the counties in the country.
Entire segments of the economy have been battered as people curtailed travel and leisure spending, and many have restricted their day-to-day routines to protect themselves and others from possible infection. Hotels and airlines have absorbed heavy losses. Boeing, the aerospace giant, said Wednesday it will cut an additional 7,000 jobs by the end of the year to cope with weak demand in air travel and the ongoing fallout from the 737 Max jet crisis. Share prices of cruise lines including Royal Caribbean and Carnival have been drastically cut from the start of the year and have not recovered.
Oil prices also sank, with brent crude, the international oil benchmark, plunging 5.4 percent to $39.36 a barrel. The pandemic has crushed demand for gasoline and other petroleum products, as Americans do less driving and cut back on commercial travel.
Other companies have emerged as clear “winners” during the pandemic, owing to their technology offerings that helped people adapt to pandemic conditions and to surging consumer demand. Shares of Zoom, the online communications company, have increased by seven times their value from the beginning of the year; Peloton, the maker of the high-end exercise bike, has swelled more than four times its January value.
Across the Atlantic, German Chancellor Angela Merkel announced a month-long partial lockdown, with bars, restaurants and theaters closing, and new limits on public gatherings. Neighboring Switzerland imposed new restrictions as well. And in an evening address Wednesday, French President President Emmanuel Macro is expected to announce similar public health measures.
In the coming days, investors will parse financial results from the largest companies in technology, including Facebook, Amazon, Apple and Alphabet, which report earnings on Thursday, and will offer Wall Street the latest indication of how their businesses have fared during the pandemic. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)
The tech giants have fueled much of the market’s relentless growth this summer. As households and businesses transitioned to extended periods of remote work and school, the mega-platforms further entrenched their positions while smaller rivals stumbled. A strong earnings showing from big tech could highlight their resilience to the turbulence unleashed by the virus. But a weaker performance might underscore the fragility of the economic recovery and the uncertainty facing even the best positioned U.S. businesses.