The S&P 500 index closed lower on Wednesday as mounting U.S. layoffs in the wake of new mandated lockdowns to contain surging COVID-19 infections dampened investor risk appetite.
The index and the Dow Jones Industrial Average retreated from record closing highs, pulled lower by cyclicals and small caps that drove the rally earlier in the week.
But pandemic-resilient tech and tech-adjacent market leaders helped keep the Nasdaq as well as the TSX afloat.
“It’s a growth day, flipping back the other way away from value,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “It’s this ongoing struggle between the virus and the vaccine.”
“There’s a reality setting in that while the vaccine will start being distributed fairly quickly, the virus isn’t go away quickly and therefore the timeline for economic improvement is getting pushed out.”
A wide range of data released in advance of Thursday’s Thanksgiving holiday in the U.S. was dominated by a second consecutive week of unexpected jobless claims increases, suggesting that new restrictions to combat spiking coronavirus cases could hobble the struggling labor market’s recovery.
“The economic data is not good, and we know it won’t be good for some time given this new wave of the virus,” Ghriskey added.
The market appeared to be replaying the previous two weeks, which began with rallies driven by promising vaccine news but pivoted back to stay-at-home plays on near-term pandemic realities and lack of new fiscal stimulus.
Still, the vaccine developments and removal of uncertainties surrounding the U.S. presidential election have driven Wall Street indexes to record closing highs, and put the S&P 500 on course for its best November ever.
Market participants believe U.S. stocks have more room to climb. A recent Reuters poll showed analysts believe the S&P 500 will gain 9% between now and the end of 2021. The index has surged about 66% since the coronavirus-led crash in March and is up about 12% so far this year.
Meanwhile, a separate Reuters poll suggested that Canada’s main share index will extend its rally over the coming year as the likely rollout of a COVID-19 vaccine bolsters prospects for the economically sensitive financial and resource stocks that dominate the index. The median forecast in a survey of more than 20 portfolio managers and strategists was for the S&P/TSX Composite index to rise nearly 8% to 18,400 by the end of 2021. That was higher than the 18,000 forecast in August’s poll, and would surpass February’s record high of 17,970.51.
The S&P/TSX Composite Index closed up 38.82 points, or 0.22%, at 17,313.07. The tech sector was the standout performer, gaining 1.67%. Shopify, which was the subject of an upbeat article in the New York Times magazine this week, gained 4.25%. But the big star in the Canadian tech world Wednesday was Sierra Wireless, rallying 28.17% after Colliers Securities analyst Charles Anderson initiated coverage of the stock with a “buy” rating and US$20 price target. That was well above the analyst consensus.
The Dow Jones Industrial Average fell 173.77 points, or 0.58%, to 29,872.47; the S&P 500 lost 5.76 points, or 0.16%, to 3,629.65; and the Nasdaq Composite added 57.08 points, or 0.47%, at 12,094.40.
Of the 11 major sectors of the S&P 500 seven ended the session in the red, with energy suffering the largest percentage loss.
The economically sensitive banking sector lost ground, with the S&P 500 Banks index shedding 0.7%.
Tesla Inc, which surpassed $500 billion in market capitalization on Tuesday, extended its gain by 3.4% even after the electric-car maker recalled about 9,500 vehicles.
The company also plans to start manufacturing electric vehicle chargers in China starting next year, according to documents it submitted to Shanghai authorities.
Declining issues outnumbered advancers on the NYSE by a 1.24-to-1 ratio; on Nasdaq, a 1.01-to-1 ratio favored decliners.
The S&P 500 posted 15 new 52-week highs and no new lows; the Nasdaq Composite recorded 120 new highs and eight new lows.
Volume on U.S. exchanges was 10.76 billion shares, compared with the 11.17 billion average over the last 20 trading days.
Oil prices climbed nearly 2% to their highest in more than eight months, as data showing a surprise drop in weekly U.S. crude inventories extended a rally driven by hopes that a COVID-19 vaccine will boost fuel demand.
Brent crude rose 75 cents, or 1.6%, to settle at $48.61 a barrel, its highest since early March.
U.S. West Texas Intermediate crude also closed at its highest since early March, rising 80 cents, or 1.8%, to $45.71.
Both benchmarks, which gained 4% on Tuesday, rose for a fourth straight session.
U.S. crude inventories fell by 754,000 barrels last week, government data showed, surprising analysts who in a Reuters poll had predicted a 127,000-barrel rise. Inventories at Cushing, Oklahoma, the delivery point for WTI, fell by 1.7 million barrels.
Read more: Stocks that saw action Wednesday - and why
Reuters, with files from Darcy Keith of The Globe and Mail
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