Monday June 15th

15-06-2020

Dow futures sink 500 points as market pullback continues, airline and retail shares decline

U.S. stock index futures dropped in early trading on Monday, pointing to more losses ahead as investors grapple with signs of a second wave of coronavirus cases as the U.S. economy reopens. Futures on the Dow Jones Industrial Average lost 538 points, or 2.1%. S&P 500 futures fell 1.8%. Nasdaq-100 futures dropped 1.3%. Stocks which stand to benefit the most from a successful reopening led the losses in premarket trading. Carnival and Royal Caribbean cruise lines each lost more than 8%. United Airlines lost 8.2%. Retailers Kohl’s and Gap declined. These types of stocks surged in May as investors bet that the worst of the virus was over. The early action in futures markets followed a big pullback last week triggered by rising fears of a resurgence in the virus as well as investors’ profit-taking after the massive comeback. The Dow and S&P 500 lost 5.5% and 4.7% last week, respectively, while the Nasdaq shed 2.3%. All three major equity benchmarks suffered their worst week since March 20. “The meltup may need to take a break, as sentiment has turned too bullish too rapidly,” Ed Yardeni, president and chief investment strategist at Yardeni Research, said in a note on Sunday. “Now that reopening is happening, there’s fear of suboptimal results: less social distancing triggering a second wave of the virus, followed by another round of lockdowns.” Meanwhile, Governor Andrew Cuomo warned New Yorkers against triggering a second wave of the coronavirus. He said on Sunday the state has received 25,000 complaints about businesses violating rules of the phased reopening, threatening to take liquor licenses from bars and restaurants. “The Covid deterioration in certain states will stay an overhang for the market, although it would take a sustained increase in US numbers overall to spark a dramatic shift in the narrative,” Vital Knowledge founder Adam Crisafulli said in a note on Sunday. Treasury Secretary Steven Mnuchin told CNBC on Thursday that shutting down the economy for a second time to slow Covid-19 isn’t a viable option as it will “create more damage.” After last week’s sell-off, the S&P 500 is down 5.8% on the year, still more than 38% higher from its March low. The 30-stock Dow is down 10.2% year to date. Stocks in Asia dropped on Monday as investors weighed the potential impact of recent spikes in coronavirus cases. In Japan, Nikkei 225 dropped 3.47% to close at 21,530.95 while the Topix index slipped 2.54% to end its trading day at 1,530.78. Over in South Korea, the Kospi plunged 4.76% to close at 2,030.82. Mainland Chinese stocks were lower on the day, with the Shanghai composite down 1.02% to around 2,890.03 while the Shenzhen component dipped 0.528% to about 11,192.27. Hong Kong’s Hang Seng index declined 2.16% to close at 23,776.95. Oil prices fell on Monday as new coronavirus infections hit China, Japan and the United States, adding to concerns that a resurgence of the virus could weigh on the recovery of fuel demand. Brent crude was down 53 cents, or 1.37%, at $38.20 a barrel. West Texas Intermediate crude fell 82 cents, or 2.29%, to trade at $35.43 per barrel. Gold slipped on Monday as the dollar lingered near a more than one-week high, but the decline was limited by fears of a second wave of coronavirus infections in Beijing. Spot gold was down 0.7% at $1,718.13 per ounce. U.S. gold futures slipped 0.8% to $1,722.70.