Wall Street slides to seven-week low on new lockdown fears

NEW YORK (Reuters) – Wall Street’s main indexes slid to seven-week lows on Monday, with the S&P 500 and Dow each tumbling more than 2%, as concerns about fresh coronavirus-driven lockdowns in Europe raised fears the U.S. economy faces a longer road to recovery than expected.

The death of U.S. Supreme Court Justice Ruth Bader Ginsburg increased the likelihood another stimulus package will not be approved in Congress before the Nov. 3 presidential election and sparked large declines in the healthcare sector.

The Dow shed as much as 900 points and the CBOE Market Volatility index .VIX, Wall Street’s fear gauge, shot up to its highest level in nearly two weeks.

Ginsburg’s death added to growing uncertainty about the election outcome and health of the economy.

“It just kind of crowds out the agenda, the idea that we are going to get a fiscal stimulus package before the election,” said Ed Campbell, portfolio manager and managing director at QMA in Newark, New Jersey.

“There is also just general election-related jitters … and possibly that we have a contested or delayed outcome.”

Congress has for weeks remained deadlocked over the size and shape of a fifth coronavirus-response bill, on top of the roughly $3 trillion already enacted into law.

Healthcare providers came under pressure on uncertainty over the fate of the Affordable Care Act (ACA), better known as Obamacare, with shares of Universal Health Services UHS.N falling more than 11%.

Ginsburg’s death could lead to a tie vote when the Supreme Court hears a challenge to the constitutionality of ACA in November, Mizuho, Stephens Inc and other financial services firms said.

FILE PHOTO: Members of the media report outside of the New York Stock Exchange as the building opens for the first time since March while the outbreak of the coronavirus disease (COVID-19) continues in the Manhattan borough of New York, U.S., May 26, 2020. REUTERS/Lucas Jackson

Wall Street has tumbled in the past three weeks as investors dumped heavyweight technology-related stocks following a stunning rally that lifted the S&P 500 and the Nasdaq to new highs after plunging in March as economies entered recession.

Another round of business restrictions will threaten a nascent recovery in the wider economy and add further pressure on equity markets, analysts said. The first round of lockdowns in March had led the S&P 500 .SPX to suffer its worst monthly decline since the global financial crisis.

In contrast to last week’s trend, declines were led by value-oriented sectors such as industrials .SPLRCI, energy .SPNY and financials .SPSY as opposed to technology stocks .SPLRCT. Financials were poised to notch their worst day since June 26.

Airline, hotel and cruise companies tracked declines in their European peers as the UK signalled the possibility of a second national lockdown. Europe’s travel and leisure index .SXTP marked its worst two-day drop since April.

The largest gainer among the Nasdaq 100 was Zoom Video Communications Inc ZM.OQ, which rose 6.2% on the prospect that fresh lockdowns would spur greater use of the product.

In late afternoon, the Dow Jones Industrial Average .DJI was down 847.22 points, or 3.06%, at 26,810.2, the S&P 500 .SPX lost 82.75 points, or 2.49%, to 3,236.72 and the Nasdaq Composite .IXIC dropped 178.22 points, or 1.65%, to 10,615.06.

JPMorgan Chase & Co JPM.N and Bank of New York Mellon Corp BK.N fell 3.82% and 4.71%, respectively, on reports that several global banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

The S&P banking subindex .SPXBK lost 4.3%.

Nikola Corp NKLA.O plunged 20.2% after its founder, Trevor Milton, stepped down as executive chairman following a public squabble with a short-seller over allegations of nepotism and fraud.

General Motors Co GM.N, which recently said it would take an 11% stake in the electric truck maker, slipped 5.5%.

Declining issues outnumbered advancing ones on the NYSE by a 8.67-to-1 ratio; on the Nasdaq, a 5.60-to-1 ratio favored decliners.

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