Stocks fade in mixed trading amid worries on virus, economy

The S&P 500 was 0.4 per cent lower in late trading, after paring earlier losses, with the sharpest drops hitting oil producers, banks, airlines and other stocks whose fortunes are most closely tied to a reopening and strengthening economy.

Treasury yields also fell in a sign of continued caution in the market.

The Dow Jones Industrial Average was down 298 points, or 1.1 per cent, at 25,769, as of 3:08 p.m. Eastern time.

Smaller stocks sank more than the rest of the market, which often happens when investors are downgrading their expectations for the economy. The Russell 2000 index of small-cap stocks lost 1.7 per cent.

Tech stocks were holding up better than the rest of the market, though, as investors continue to bet they can keep growing almost regardless of the economy's strength. They helped the Nasdaq composite to a gain of 0.6 per cent.

They also helped the S&P 500 pare its loss through the afternoon, after being down as much as 1.7 per cent.

“The broad equity market is navigating through a zone of uncertainty,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

“There are ample reasons for caution,” he said. “Clearly there's uncertainty surrounding the impact and duration of this virus.”

Thursday's headline economic report showed that a little more than 1.3 million workers filed for unemployment claims last week.

It's an astoundingly high number, but it's also down down from 1.4 million the prior week and from a peak of nearly 6.9 million in late March.

The improvements back up investor optimism that the economy can recover as states and other governments relax restrictions put in place earlier this year to slow the coronavirus pandemic.

Such optimism has helped the S&P 500 recently climb back to within roughly 7 per cent of its record set in February, after earlier being down nearly 34 per cent.

But economists point to a troubling slowdown in the pace of improvements, including moderating declines in the four-week average of jobless claims . “At best, these numbers are deemed 'less bad,' but still seem to be indicating that we are traveling on a 'slow boat' to a recovery that looks nothing like the 'V' that so many had hoped it would be,” Kevin Giddis, chief fixed income strategist at Raymond James, wrote in a report.

Investors are worried that worsening infection levels across swaths of the US South and West, among other global hotspots, could derail the budding recovery.

Some states are rolling back their reopenings, while others are ordering people arriving from hotspots to quarantine.

Markets have been quick to react to infection and hospitalization rates in Florida and other big Sun Belt states in particular.

Thursday's losses for stocks accelerated after Florida reported the largest daily increase in deaths yet from the pandemic, with its cumulative death toll topping 4,000.

Such concerns helped push Treasury yields lower. The yield on the 10-year note, which tends to move with investors' expectations for the economy and inflation, sank to 0.60 per cent from 0.65 per cent late Wednesday.

The price of gold also held above $1,800 per ounce. Gold tends to rise when investors are worried about the economy, and on Wednesday it touched its highest price since September 2011.

After flipping between small gains and losses, gold for delivery in August dipped USD 16.80 to settle at USD 1,803.80.

In the stock market, the sharpest losses hit companies whose profits tend to rise and fall most closely with the strength of the economy.

Energy stocks dropped 4 per cent for the biggest loss among the 11 sectors that make up the index. Exxon Mobil sank 3.4 per cent, and ConocoPhillips fell 5.7 per cent.

Financial stocks were also particularly weak, as a struggling economy raises the threat of borrowers failing to repay their loans. Bank of America dropped 1.7 per cent, Citigroup lost 2.8 per cent and JPMorgan Chase fell 1.9 per cent.

Other companies that desperately need the pandemic to ease so customers can return also struggled. United Airlines lost 7.2 per cent, and mall-owner Simon Property Group fell 5.1 per cent.

Walgreens Boots Alliance slumped 8.1 per cent for one of the biggest losses in the S&P 500 after it said it lost USD 1.7 billion in the latest quarter as the pandemic kept its customers around the world at home.

Companies across the country are preparing to report their second-quarter results in upcoming weeks, and forecasts are uniformly dismal.