Dow books back-to-back loss as Wall Street struggles to rebound from Monday selloff

Dow books back-to-back loss as Wall Street struggles to rebound from Monday selloff

Stocks on Tuesday finished mostly lower, a day after their worst decline in more than a month, as rising COVID-19 cases underlined worries about economic activity and lawmakers abandoned efforts to reach an agreement on a new round of fiscal spending before the Nov. 3 elections.

The market’s softer tone came as investors also digested a barrage of earnings reports from the likes of Dow components 3M Co., Merck & Co. and Caterpillar and news of a proposed $35 billion deal announcement between chip makers Advanced Micro Devices and Xilinx Inc.

What did major benchmarks do?

The Dow Jones Industrial Average DJIA, -0.80% fell 221.19 points, or 0.8%, to end at 27,463.19, while the S&P 500 SPX, -0.30% lost 10.29 points, or 0.3%, to finish at 3,390.68. The tech-heavy Nasdaq Composite COMP, +0.63% bucked the softer tone, rising 72.41 points, or 0.6%, to end at 11,431.35.

The Dow on Monday fell 650.19 points, or 2.3%, to finish at 27,685.38, after dropping more than 900 points at its session low. The S&P 500 dropped 64.42 points, or 1.9%, to end at 3,400.97, while the Nasdaq Composite declined 189.34 points, or 1.6%, to close at 11,358.94. The Dow’s fall was its biggest one-day point and percentage drop since Sept. 3, while the S&P 500 suffered its biggest decline since Sept. 23.

What drove the market?

Equity markets struggled to gain traction Tuesday despite upbeat corporate earnings reports and merger news, against the backdrop of rising coronavirus cases globally and the negligible chance of a fresh fiscal aid package from lawmakers before the Nov. 3 presidential election.

Much like Monday, lingering concerns around the coronavirus trajectory saw shares of fast-growing companies outperform stocks associated with industries sensitive to growth expectations.

The global tally of confirmed cases of COVID-19 climbed above 43.5 million on Tuesday, according to data aggregated by Johns Hopkins University, while the death toll rose to 1.16 million. The U.S. has the highest case total at 8.7 million. On top of that, the rise in the seven-day average of new cases in the U.S. reached an all-time high of 68,767.

“COVID case counts and hospitalizations continue to rise — these will continue to be closely watched as investors gauge the likelihood of more stringent mitigation measures and their ultimate impact on consumption and the economy,” said Yousef Abbasi, global market strategist at StoneX.

The U.S. Senate broke for a recess before the elections after confirming Amy Coney Barrett as the 115th Supreme Court justice, filling the vacancy left by the death of Ruth Bader Ginsburg, but it appears unlikely that a fresh fiscal aid package can be voted on before the election.

Expectations also have fluctuated around prospects for a so-called blue wave, where Democrats win the presidency, a majority in the Senate and keep control of the House, which is viewed as a positive path toward a substantive and wide-ranging fiscal package.

Former Vice President Joe Biden leads President Donald Trump by 7.8 percentage points, according to a recent average of polls from RealClearPolitics, while the Democratic challenger also leads Trump in key battleground states by 4.1 percentage points, potentially deciding the race for the Oval Office.

Corporate news was largely positive, as Advanced Micro Devices announced a merger with Xilinx, Exact Sciences said it would buy Thrive Earlier Detection Corp. and United Parcel Service Inc. UPS, +1.69% said Tuesday it is planning to hire 50,000 seasonal workers this Friday at its annual “UPS Brown Friday” hiring blitz. 

Pharmaceutical companies Merck, Eli Lilly and Pfizer reported mixed earnings, as total returns for big drug companies have lagged behind those for the S&P 500 index this year. Sales of therapies unrelated to COVID-19 have suffered as patients stayed away from hospitals and pharmacies.

In U.S. economic reports, durable-goods orders rose a stronger-than-expected 1.9% in September. The Case-Shiller national home price index saw a 5.2% year-over-year gain for the 20 city index in August, up from revised 4.1% in July. The Conference Board’s index of consumer confidence dipped to 100.3 this month from a pandemic high of 101.3 in September. The decline was slightly bigger than Wall Street expected.

Which companies were in focus?

  • Advanced Micro Devices Inc. AMD, -4.07%  said Tuesday it had reached an agreement to acquire Xilinx Inc. XLNX, +8.55% in an all-stock deal valued at $35 billion. Xilinx shares rose 8.6%, while AMD shares closed 4.1% lower.
  • Shares of Harley-Davidson Inc. HOG, +22.06% jumped 22.1% after the motorcycle company reported third-quarter earnings and revenue that well exceeded the Street forecast.
  • Shares of Pfizer Inc. PFE, -1.29%  fell 1.3% after the drugmaker missed sales expectations for the quarter. Pfizer had earnings of $2.2 billion, or 39 cents per share, in the third quarter of 2020, down from $7.7 billion, or $1.36 per share, in the same quarter a year ago
  • Shares of JetBlue Airways Corp. JBLU, -5.41% were down 5.4%, after the air carrier swung to a narrower-than-expected loss, as revenue fell less than forecast.
  • Exact Sciences Corp. EXAS, +23.03% said Tuesday it has agreed to acquire Thrive Earlier Detection Corp. in a cash and stock deal worth up to $2.15 billion. Its shares surged 23%.
  • Defense contractor Raytheon Technologies  RTX, -7.03% said its third-quarter net income slumped to $264 million, or 17 cents a share, from $1.15 billion, or $1.33 a share, while sales rose to $14.74 billion from $11.37 billion. Shares fell 7%.
  • Eli Lilly & Co. LLY, -6.91% shares fell 6.9%, after the drugmaker posted weaker-than-expected earnings for the third quarter, while U.S. government officials put an early end to a study testing an Eli Lilly antibody drug for people hospitalized with COVID-19.
  • Merck & Co. Inc. MRK, -1.07% said its profit and sales for the September quarter rose as it continued to work on treatments and vaccines for Covid-19. Shares were down 1.1%.
  • 3M MMM shares shed 3.1% after the consumer, health care and industrial products company reported third-quarter profit that beat expectations, while sales came in just above forecasts.
  • Shares of Caterpillar Inc. CAT dropped 3.2%, after the construction and mining equipment maker reported third-quarter profit and sales that fell, but came in above expectations.

What did other markets do?

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.766% was down 2.3 basis points to 0.778%, booking its third straight drop.

The pan-European Stoxx 600 Europe index SXXP, -0.94% fell 1% and London’s FTSE 100 stock index UKX, -1.08% lost 1.1%.

Oil futures were buoyed as Tropical Storm Zeta moved toward the Gulf Coast, with the U.S. benchmark CL.1, -2.25% gaining $1.01 per barrel, or 2.6%, to $39.57 a barrel. Gold edged higher, with the December contract GCZ20, -0.17% tacking on $6.20, or 0.3%, to settle at $1,911.90 an ounce on Comex.

The ICE U.S. Dollar Index DXY, 0.20%, a measure of the currency against a basket of six major rivals, was down 0.1%.

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