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U.S. Stocks Slip as Rally Pauses

11/20/2020 | 10:23am

By Joe Wallace

U.S. stocks drifted lower Friday, putting Wall Street on track to end a choppy week with muted losses.

The Dow Jones Industrial Average slipped 0.3%. The tech-heavy Nasdaq Compsite shed 0.1%. The S&P 500 fell 0.1%.

Stocks have bounced around in recent days, after optimism about the development of effective coronavirus vaccines propelled the Dow industrials to a record at the start of the week. But stocks have taken a breather since. Surging coronavirus infections, signs that the economy has lost momentum, and the U.S. Treasury's decision to allow several emergency Federal Reserve programs to expire have deflated some of that cheer.

All three indexes are on course for weekly declines of about 0.5%.

Some investors also said the recent moves mark a healthy pause after a vigorous rally after the election.

"We're looking at short-term negatives," said Paul Jackson, head of asset allocation research at Invesco. "The markets are busy trying to balance that with the longer-term good news that is coming from vaccines."

Stocks are likely to wobble in the coming months before rallying in 2021 as the rollout of vaccines allows swaths of the world economy to reopen, Mr. Jackson added.

Treasury Secretary Steven Mnuchin said Thursday that several novel programs that have backed corporate credit and municipal-borrowing markets would end on Dec. 31. Mr. Mnuchin asked the Fed to return more than $70 billion in funds that had already been transferred to the central bank to cover loan losses.

The decision raises uncertainty about the degree of support that will be in place for the economy if states impose further restrictions to quell the wave of infections.

Every indicator of the virus's spread across the U.S. continued to accelerate. The country logged its highest-ever number of newly reported Covid-19 infections in a day Thursday and reported record-high hospitalizations for the 10th day in a row. California Gov. Gavin Newsom issued a new stay-at-home order that will require the most of residents to stay at home and businesses to close between 10 p.m. and 5 a.m.

The lack of agreement in Congress on a new round of aid for the economy has continued to weigh on investor sentiment this week.

"The U.S. economy still needs stimulus to get over the hump at the moment," said Brian O'Reilly, head of market strategy at Mediolanum International Funds. Still, Mediolanum is positioning its funds for a bounceback next year in shares of industries that have suffered during the pandemic, such as financial services and materials.

In corporate news, shares in Pfizer rose 2.5% after the pharmaceutical giant said it plans to ask U.S. health regulators on Friday to permit use of its Covid-19 vaccine. Once the company files, it would be up to the U.S. Food and Drug Administration to decide whether the two-shot vaccine works safely enough to roll out to millions of people.

Gilead Sciences fell 1.1% after the World Health Organization recommended against the use of antiviral drug remdesivir for Covid-19.

In bonds, the yield on 10-year U.S. Treasury notes slipped to 0.849%, from 0.854% Thursday.

Overseas, basic-resources, retail and oil-and-gas stocks led European markets higher. The pan-continental Stoxx Europe 600 edged up 0.4%.

The Shanghai Composite Index gained 0.4% by the close, and Japan's Nikkei 225 ticked down 0.4%.

U.S. crude-oil futures rose 0.4%, extending weekly gains ahead of the Baker Hughes survey of U.S. drilling activity.

Gunjan Banerji contributed to this article.

Write to Joe Wallace at Joe.Wallace@wsj.com

(END) Dow Jones Newswires

11-20-20 1022ET

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