Dow on Track to Wrap Up Worst Month Since March

By Jem Bartholomew and Xie Yu

U.S. stocks fell Friday, with the Dow Jones Industrial Average on track to close out its worst week and month since March, following a sharp selloff in big technology stocks.

The Dow dropped 0.4%, a 95-point decline. It had already shed 5.9% this week, putting it on track for its worst weekly performance since the height of the market tumult.

The S&P 500 fell 0.5%, while the tech-heavy Nasdaq Composite Index retreated 0.8%.

Volatility has dominated markets this week, prompted by risks tied to the Nov. 3 elections, a record high in coronavirus infections in the U.S., fresh lockdowns in Europe that threaten economic growth, and a mixed bag of earnings from big tech.

"Markets are concerned that we are replaying February and March," said Chris Beauchamp, chief market analyst at IG Group. "It probably still isn't in that category yet, but it is heading in the wrong direction."

As investors' risk appetite diminished, they moved funds into U.S. government debt, pushing the yield on the 10-year Treasury down to 0.822%, from 0.834% on Thursday.

Earnings reports and guidance from technology companies after the closing bell weighed heavily on markets overnight. Twitter plunged 14.8% in offhours trading after posting its slowest user growth in years and warning that uncertainty around the U.S. election could compress ad spending.

Apple shares dropped 3.9% premarket after quarterly iPhone sales fell from a year earlier. That, combined with a delay in the launch of the company's new smartphone, led to iPhone revenue falling more than analysts had expected.

While big tech has driven the U.S. stock market recovery this year, that means "when we see any disappointments on particularly high-multiple stocks, then obviously the magnitude of the downgrade or the earnings-miss becomes far greater," said UBS strategist Nick Nelson.

Shares of Facebook, Amazon.com, Tesla, Microsoft and Netflix were all down around 1% premarket.

"The big tech earnings were not that bad but markets did not respond positively, so that does suggest a deeper sense of negativity in the market," said Seema Shah, chief strategist at Principal Global Investors.

In contrast, shares in Google's parent Alphabet rose almost 7.3% in premarket trading. The company r eported third-quarter profit of $11.2 billion, well outstripping analyst estimates.

Shares of Exxon Mobil slipped 0.6% before the bell, after it reported its third consecutive quarterly loss as the pandemic continued to sap oil demand.

U.S. households increased spending 1.4% in September for the fifth straight month as remaining pandemic aid helped boost incomes by 0.9%, the Commerce Department reported Friday.

Overseas, the Stoxx Europe 600 wavered between small gains and losses.

Europe is once again at the epicenter of the coronavirus pandemic, with the continent now recording more and faster-rising deaths than the U.S. in an abrupt reversal of fortunes. Fresh lockdowns by governments in response to the rising infection levels, led by France and Germany, are weighing on markets.

This week, "you've clearly got a big shift in tightened mobility restrictions, which of course have an impact on economic growth and corporate profits," said Mr. Nelson. "We've been relatively cautious for the last six weeks, thinking markets have maybe disconnected from the macro and the Covid news flow. And this week there's been an abrupt reconnection there."

The rise in infections across parts of Europe is stretching the capacity of hospitals in the worst-hit cities in France, Belgium, Italy and elsewhere. On a per capita basis, deaths from Covid-19 in Europe are now rapidly approaching U.S. levels, after running significantly below since May.

"The sentiment is just so whipsawed at the moment," said Andy Maynard, managing director of equities sales trading at China Renaissance Securities, citing the uncertainty surrounding U.S. elections and the resurgence of virus infections. While the election and U.S. stimulus negotiations were a focus for investors, "the bigger risk is actually on global economic recovery and what's happening to Covid, especially looking at Europe right now," he added.

In Asia, major markets ended the day sharply lower. South Korea's Kospi index dropped 2.6%. China's Shanghai Composite Index fell 1.5%, Hong Kong's Hang Seng declined 2% and Japan's Nikkei 225 shed 1.5%.

The prospect of an unclear election result is disturbing the market, said Hong Hao, chief strategist at Bocom International in Hong Kong. "The latest news shows the gap is shrinking between Biden and Trump, and the market hates a scenario that things might end up messy, like in 2000," he said.

--Joanne Chiu in Hong Kong contributed to this article.

Write to Xie Yu at [e-mail]

(END) Dow Jones Newswires

10-30-20 0947ET