AP – United States (US) stock indexes pulled further away from their recent highs on Friday as prospects for another aid package from Washington faded while a surge in virus cases threatens to inflict more damage on an already battered economy.
The S&P 500 slipped 0.1 per cent, its third-straight decline since it set a record high on Tuesday. The benchmark index ended the week one per cent lower after two weeks of solid gains. Losses in financial, technology, health care and other sectors outweighed gains in communication services stocks, industrial companies and elsewhere. Treasury yields fell broadly, a signal that traders were seeking to lessen their exposure to riskier holdings.
The latest bout of selling, which eased toward the end of the day, came as investors continue to hope for Washington to come through with another financial lifeline for people, businesses and state governments struggling as the coronavirus pandemic worsens. But an emerging USD900 billion aid package from a bipartisan group of lawmakers has essentially collapsed because of continued partisan bickering.
“We still don’t have a deal in Congress for a rescue package,” said Vice President of Trading and Derivatives at Charles Schwab Randy Frederick. “If it doesn’t happen, the market could struggle.”
The S&P 500 slipped 4.64 points to 3,663.46. The index had been down 34 points in the early going. The Dow Jones Industrial Average got a boost from Disney, which hit a new high. The index rose 47.11 points, or 0.2 per cent, to 30,046.37. The tech-heavy Nasdaq lost 27.94 points, or 0.2 per cent, to 12,377.87. Small company stocks, which have been making solid gains this month, also fell. The Russell 2000 small-cap index gave up 11.01 points, or 0.6 per cent, to 1,911.70.
Technology companies and banks led the decline. Apple fell 0.7 per cent and Bank of America dropped 1.9 per cent.
Disney jumped 13.6 per cent, a record high and the biggest gain in the S&P 500, after giving investors an encouraging update on subscriber growth and future plans for its Disney Plus streaming service.
Stocks have been climbing over the last few weeks as advances in vaccine development raised hopes that the pandemic could be tamed in the coming months and set the global economy on a path to normalcy.
“The excitement over the vaccine has already been priced in and the market is fairly overbought, based on where we are in the economy right now,” said Managing Partner at Kace Capital Advisors Kenny Polcari.
Widespread vaccination will take months and the virus pandemic is prompting tighter restrictions on businesses. An already slow economic recovery appears to be stalling in the wake of the latest surge and unemployment is rising.
Polcari said markets are simply churning and consolidating following a strong November and he expects that to continue through December as stimulus talks continue. Wall Street is also waiting for a special election in Georgia in early January, which could potentially switch the balance of power in the US Senate.