Markets sank again on Friday, leading stocks to post their worst week—and month—since the coronavirus crashed markets in March, just as the potential of heightened volatility as a result of unclear election results ramps up—and further dampens investor sentiment.
The Dow Jones Industrial Average closed down 150 points, or 0.6%, pushing weekly losses to roughly 1,800 points—the index’s worst showing since it tanked nearly 3,800 points in the week ending March 10, when the coronavirus-induced market selloff first hit.
The broader S&P 500 fell 6% this week, and 1.2% on Friday alone; it’s now virtually flat this year, while the Dow—a measure of 30 stock market heavyweights like Goldman Sachs, McDonald’s, Microsoft and Disney—is down about 8%.
Even the Nasdaq, which has far outperformed the broader market this year (up 20%), struggled this week—shedding close to 6% and leading market losses on Friday, when it closed down 2.5%.
All four of the FAANG firms that released earnings yesterday—Facebook, Apple, Amazon and Google parent Alphabet—reported better-than-expected results, but only Alphabet’s shares managed to buck broader market uncertainty, climbing 4% on Friday, while the rest of the lot fell.
Early Friday, oil giants Exxon Mobil and Chevron both posted dismal results, including revenue declines of roughly 30% for each; the price of U.S. oil benchmark West Texas Intermediate sank nearly 10% this week.
Global stocks were mixed: France’s CAC 40 ended Friday up 0.5%, while the United Kingdom’s FTSE 100 closed virtually flat, and Asian markets fell about 1%.
Fueling volatility, the economic recovery in recent months has been sluggish and uneven, with indicators like retail sales completely recovering and some, such as home buying, surging to more than ten-year highs, all while millions of Americans remain unemployed and weekly jobless claims struggle to recover. Traditionally high election-season market volatility has also been compounded in recent weeks by a drawn-out back-and-forth in Washington over another round of fiscal stimulus, and adding on the recent surge in coronavirus cases seems to have marked a tipping point for the market this week.
“In 2016, the market was down nine out of ten days before the election; this week’s market action is absolutely not a surprise,” says David Bahnsen, the chief investment officer at $2.5 billion Newport Beach, California-based advisory The Bahnsen Group. “None of Thursday’s tech earnings were bad, and some were spectacular, but the market is reacting negatively because when something is priced for better-than-perfection, it becomes pretty hard to live up to those expectations. The biggest fear for markets remains uncertainty.”
What To Watch For
Election results—and when we get them. Experts, including Bahnsen on Friday, warn that a contested election could further ramp up uncertainty, which could naturally heighten market volatility, though Bahnsen adds that in the long term, the election’s impact on the market is relatively low. That said, “there are a lot of unanswered questions, and if they remain unanswered next week, markets will have to slog through it all just as our country will,” Bahnsen adds.
2,997. That’s how many points the Dow was down when it crashed 13% on March 16—the largest point drop in history, triggered by a mass selloff as investors realized just how crippling the coronavirus could be to the economy.
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