Global markets, oil prices and the U.S. dollar slid on Thursday after President Donald Trump raised the possibility of delaying the November U.S. election and new government data underscored the coronavirus’ deep economic impact.
Trump, facing an immediate pushback from top Republicans, repeated his claims, without evidence, of mail-in voter fraud, writing in a post on Twitter, “delay the election until people can properly, securely and safely vote???”
“It’s moved the market, for sure,” said Priya Misra, head of global rates strategy at TD Securities in New York. “Not only do we have uncertainty about who wins, I think we have uncertainty about the process.”
A report on additional jobless claims and collapsed gross domestic product had already set Wall Street up to open lower.
The MSCI world equity index fell 3.13 points or 0.56%, to 552.34.
Canada’s main stock index erased large early losses and closed flat on Thursday, as energy stocks were weighed by lower oil prices and a slate of dismal earnings from those including Husky Energy Inc and Crescent Point Energy Corp.
The Toronto Stock Exchange’s S&P/TSX composite index was up 4.32 points, or 0.03%, at 16,298.98.
The energy sector dropped 2.2% as oil prices fell on concerns that surging coronavirus infections worldwide would jeopardize a recovery in fuel demand.
Brent, the international benchmark, settled down 81 cents at $42.94 a barrel. U.S. crude futures fell $1.35 to settle at $39.92 a barrel.
Shares of Husky Energy fell 4.9% after the company posted a quarterly loss compared with a year-ago profit, while Crescent Point dropped 6.7% after releasing its results.
Other decliners include Whitecap Resources Inc, which fell 4.3% after the oil producer posted a wider-than-expected loss.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.4% as gold futures fell.
The commodity-linked Canadian dollar fell to a one-week low against its U.S. counterpart on Thursday as a drop in oil prices offset broad-based weakness for the greenback.
The loonie was trading 0.8% lower at 1.3441 to the greenback, or 74.40 U.S. cents. The currency touched its weakest intraday level since July 22 at 1.3459.
The S&P 500 and Dow closed lower on Thursday after data painted a worrying economic picture ahead of important corporate earnings reports, while President Donald Trump exacerbated investor nervousness by floating the possibility of delaying the U.S. presidential election.
Investors fretted about earnings reports due after the close from high-flyers including Apple Inc and Amazon.com Inc .
They also worried about the expiration of enhanced employment benefits on Friday as U.S. Congress was no closer to a deal on Thursday to extend or replace the extra $600-per-week in payments to tens of millions thrown out of work by the coronavirus.
Early in the day second-quarter Gross Domestic Product (GDP) data showed the U.S. economy suffered its steepest contraction since the Great Depression, as business activity came to a halt due to lockdowns aimed at fighting the pandemic.
Also jobless claims rose last week, adding to signs the momentum of economic recovery has slowed as coronavirus cases spiraled in southern and western U.S. states.
Shortly after the data, Trump, raised the idea of a delay in elections. The idea was immediately rejected by both Democrats and his fellow Republicans in Congress, the branch of government with the power to make that change.
But the S&P gained ground as the day wore on and closed well above its session low.
The market stabilized after “opening the front hall closet and all the stuff comes tumbling out,” said Carol Schleif, deputy chief investment officer, Abbot Downing in Minneapolis, Minnesota. She cited the stimulus battle along with election uncertainty on top of weak data and earnings angst.
After the initial knee-jerk reaction, Schleif said, people stepped back and focused on Federal Reserve Chair Jerome Powell’s assurance on Wednesday that the central bank would “do whatever it takes” to support the economy.
“You open the door it comes piling out, you’re frightened and then you settle down and start picking stuff up and putting it back where it belongs,” she said.
Unofficially, the Dow Jones Industrial Average fell 223.39 points, or 0.84%, to 26,316.18, the S&P 500 lost 12.03 points, or 0.37%, to 3,246.41 and the Nasdaq Composite added 44.87 points, or 0.43%, to 10,587.81.
The market had gained ground on Wednesday even after the Fed also said a surge in virus cases was likely stalling the recovery, which will depend significantly on the virus path.
The tech-heavy Nasdaq was boosted by Qualcomm Inc after the chipmaker forecast fourth-quarter revenue largely above estimates.
But investors were anxious about earnings from the Nasdaq’s so called four horsemen - Apple and Amazon, Alphabet Inc and Facebook Inc - all due to report earnings after market close. The companies have a combined market value of about $5 trillion.
“When you have a big earnings day you’re going to have volatility in the market,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
Still Wall Street’s main indexes were headed for their fourth monthly gain in a row, with the benchmark S&P 500 only about 4% below its February record high.
“The markets have over the past several months been detached from reality and are being fueled by Fed buying and positive momentum,” said Phil Toews, chief executive officer of Toews Corp in New York.
United Parcel Service Inc soared following its quarterly results.
In Europe, dismal earnings reports and weaker-than-expected German Gross Domestic Product data worsened an already sour mood, with the STOXX 600 closing down 2.2%. Germany’s DAX index slid 3.5%, with all 30 components declining.
Earlier gains in Asian shares were undone, with MSCI’s broadest index of Asia-Pacific shares outside Japan closing 0.17% lower, while Japan’s Nikkei lost 0.26%.
U.S. GDP collapsed at a 32.9% annualized rate last quarter, slightly less than expected, but still the deepest decline in output since the government started keeping records in 1947, the Commerce Department said on Thursday.
“The fact that it was better than expected maybe is a good thing, but certainly not much better, and it’s still a terrible number,” said Randy Frederick, vice president of trading and derivatives with the Schwab Center for Financial Research.
The worries came despite news on Wednesday that all U.S. Federal Reserve members voted as expected to leave the target range for short-term interest rates between 0% and 0.25%, where it has been since March, and use its “full range of tools” if needed.
Investors must now watch negotiations in Washington over a new coronavirus relief package for the world’s largest economy.
Trump said on Wednesday his administration and Democrats in Congress were still “far apart” on a new coronavirus relief bill. Failure to agree risks letting a $600-per-week unemployment benefit lapse when it expires this week.
In currencies, the dollar index, which tracks the greenback versus a basket of six currencies, fell 0.365 points or 0.39%, to 93.088, and remains on course for its worst monthly performance in a decade.
The dollar has fallen on expectations the Fed will maintain its ultra-loose monetary policy for years, which risks adding inflationary pressure.
The benchmark 10-year U.S. Treasury note fell 3.6 basis points to yield 0.5446%.
Spot gold prices fell $17.8829, or 0.91%, to $1,952.49 an ounce. U.S. gold futures fell 0.6% to settle at $1,942.30 an ounce.
Reuters
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.