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U.S. Stocks Drop as Investors Grow Cautious About Reopening

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07/09/2020 | 05:11pm EDT

By Karen Langley and Caitlin Ostroff

The S&P 500 dropped Thursday as investors continued to back away from bets on a smooth reopening from the coronavirus shutdowns.

Fresh data showed that initial unemployment claims in the U.S. remain elevated, and the number of confirmed new Covid-19 cases in the U.S. hit a new single-day high Wednesday.

The broad U.S. stock index pulled back, dropping 17.89 points, or 0.6%, to 3152.05. Only its consumer discretionary and technology sectors gained ground. The index has surged more than 40% from its March low.

The Dow Jones Industrial Average fell 361.19 points, or 1.4%, to 25706.09, dragged down by broad losses among the blue chips.

"I think the resurgence in the Covid-19 positive cases certainly makes the markets worried," said Feifei Li, head of equities at Research Affiliates. "They are concerned about the potential second round of lockdown."

Investors continued to favor many of the megacap growth stocks that have outperformed throughout the market turmoil. Gains by Microsoft, Apple, Amazon and Alphabet helped the Nasdaq Composite rise 55.25 points, or 0.5%, to 10547.75, a new record close. The tech-heavy gauge has established a wide lead over other major indexes in 2020.

The market value of Netflix, meanwhile, surpassed Verizon's for the first time Thursday. The streaming platform is worth $223.3 billion, while Verizon is valued at $223.2 billion and AT&T is at $210.4 billion.

Analysts have attributed the stock market's rally in part to broad fiscal and monetary stimulus efforts. But they continue to parse new data that could reveal the strength of economic recovery and the progression of the coronavirus pandemic.

"It's not surprising, depending on some of the headlines that scroll through at this time, you're going to have what we call basically a choppy market," said Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions. "It's going to be uneven. You're going to have fits and starts. The market seems to focus on any sort of bad coronavirus news."

Figures Thursday showed initial unemployment claims edged down last week to 1.3 million, extending a trend of gradual declines from a peak in March. But last week's level remained well above the highest week on record before this year.

As reopenings from the coronavirus shutdowns continue, the count of confirmed new Covid-19 cases in the U.S. reached a new single-day high of 60,000 on Wednesday, according to data from Johns Hopkins University.

Shares of companies whose prospects are tied to the economic reopening came under pressure. United Airlines Holdings, American Airlines Group and Royal Caribbean Cruises all lost more than 5%.

With a flurry of new information related to the coronavirus and the approach of the presidential election later this year, many investors expect market volatility to continue.

"The cards are all still very much up in the air for the U.S. economy and the U.S. stock market," said Sarah Henry, a portfolio manager at Logan Capital Management who covers consumer sectors.

Among individual stocks, shares of Walgreens Boots Alliance dropped $3.28, or 7.8%, to $39.01 after the drugstore chain reported a quarterly loss and noted reduced traffic in U.K. stores. Bed Bath & Beyond shares fell $2.55, or 24%, to $7.86 after the home-goods chain said it would permanently close about 200 stores.

Overseas, China's stock market zoomed higher for the eighth day in a row, leading Asian indexes, while stocks in the rest of the world wavered.

The Shanghai Composite rose 1.4% Thursday, extending a winning streak that is now the longest since January 2018. Japan's Nikkei 225 Index was up 0.4% and Hong Kong's Hang Seng rose 0.3%.

"The day traders are actually a sizable part of the market," said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. He said the traders were looking at signals of the government's support for the economy: "If anywhere has had a V-shaped recovery, it's China."

Write to Karen Langley at karen.langley@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.12% 27931.02 Delayed Quote.-2.25%
HANG SENG -0.16% 25185.34 Real-time Quote.-10.52%
NASDAQ 100 -0.12% 11164.446946 Delayed Quote.28.00%
NASDAQ COMP. -0.21% 11019.300969 Delayed Quote.23.07%
NIKKEI 225 0.17% 23289.36 Real-time Quote.-1.72%
S&P 500 -0.02% 3372.85 Delayed Quote.4.42%
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