Stocks Pare Losses, Oil Tumbles Amid Fresh Covid-19 Travel Restrictions
December 21 2020 - 3:44PM
Dow Jones News
By Joe Wallace and Alexander Osipovich
The S&P 500 fell Monday as a fast-spreading strain of
coronavirus emerging from England prompted fresh travel
restrictions, a setback for the global economic recovery.
The broad-based index was down 0.4% in afternoon trading. The
Dow Jones Industrial Average ticked up 0.2%, having bounced back
from a midmorning loss of more than 420 points, or about 1.4%.
The technology-heavy Nasdaq Composite slipped 0.2%. All three
indexes were trading at records last week.
Overseas, European shares tumbled after countries across the
continent and beyond barred travelers from Britain in an effort to
keep out an infectious variant of coronavirus that is spreading
rapidly in England. The pan-continental Stoxx Europe 600 slumped
2.3%.
"People are bracing themselves for a challenging start to 2021,"
said Brian O'Reilly, head of market strategy for Mediolanum
International Funds.
Oil prices also retreated amid expectations that fresh
restrictions on European travel and transport will pinch fuel
demand heading into 2021. Futures on Brent crude, the international
energy benchmark, lost 2.6% to settle at $50.91 a barrel, their
largest one-day drop in six weeks.
Still, some investors took advantage of Monday's declines to buy
stocks, lifting the market off its session lows.
"To me, it's a buying opportunity," said Philip Blancato,
president of Ladenburg Thalmann Asset Management. In recent weeks,
his firm has bought bank and industrial stocks in expectation that
the economy will stabilize early next year, boosted by progress in
vaccinations.
"You could have as many as 20 million Americans inoculated by
the first week of January. As those numbers increase, it's going to
have a profound effect," Mr. Blancato added.
A big support for the market was the prospect of a fiscal relief
package that will ease pressure on the American economy. Congress
was set to vote Monday on the roughly $900 billion aid package,
after Republicans and Democrats reached a deal late Sunday. The
legislation -- which includes direct checks to many Americans,
additional unemployment benefits and relief for small businesses --
could help support consumption in the coming months.
"It is more an antidepressant than a stimulant," said Paul
Donovan, chief economist at UBS Global Wealth Management. "The
uncertainty here is to what extent are the $600 checks spent, and
to what extent does an extra $300 a week unemployment benefit
mitigate fear of unemployment for those who have jobs."
Ten of the S&P 500's 11 sectors were in negative territory
Monday. The only sector to post gains was financials, which got a
boost after the Federal Reserve said late Friday afternoon that it
would allow banks to resume share buybacks. Goldman Sachs shares
rallied 7%, making it the best performer in the Dow.
The blue-chip index also got a boost from Nike, whose shares
jumped 5.3% after the sportswear giant said late Friday that
digital revenue for its flagship brand rose 84% in the three months
through November.
Oil producers, airlines and cruise-line operators were all hit
by the resurgence of coronavirus fears. Exxon Mobil shed 1.9%.
American Airlines Group dropped 2.4%, while Carnival slid 2.1%.
In European markets, London-listed shares of Royal Dutch Shell
fell 5% after the oil major said it would write down the value of
its assets by up to $4.5 billion.
The U.K.'s benchmark FTSE 100 slid 1.7%. Officials over the
weekend tightened lockdown measures on London and surrounding areas
in an effort to contain the new strain of virus, which appeared to
be spreading 70% faster than earlier variants, according to the
British government.
Adding to investors' concerns about U.K. markets, negotiators
missed a Sunday deadline for reaching a Brexit agreement, raising
the prospect of a disruptive U.K. exit from the European Union at
the end of the year. The pound dropped 0.4% against the dollar.
Mutations in viruses are common, and it remains unclear whether
the new strain of coronavirus is more likely to be fatal or cause
serious illness. The new variant shouldn't stop the world economy
from rebounding in 2021 as long as vaccines are able to combat it,
investors said.
"As long as the vaccines are rolled out on schedule then by the
second quarter of next year we should see activity moving back to
normality," said Nicholas Brooks, head of economic and investment
research at Intermediate Capital Group.
In bond markets, the 10-year Treasury yield inched down to
0.941%, from 0.947% Friday. Yields fall as bond prices rise.
Asian markets were mixed. China's Shanghai Composite Index
gained 0.8%, while Hong Kong's Hang Seng fell 0.7%. In Japan, the
Nikkei 225 slipped 0.2%.
Write to Joe Wallace at Joe.Wallace@wsj.com and Alexander
Osipovich at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
December 21, 2020 15:29 ET (20:29 GMT)
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