US stock indices closed lower on Friday to cap Wall Street’s biggest weekly sell-off since March, as losses in richly priced tech heavyweights, a record rise in COVID-19 cases and jitters over the US presidential election snuffed investor sentiment.
The pandemic pushed US hospitals to the brink of capacity as COVID-19 cases in the country surpassed 9 million, while the prospect of wider restrictions in Europe raised concerns about the economic recovery.
The CBOE volatility index closed just below a 20-week high, a sign of investor jitters ahead of the final weekend before the US presidential election on Tuesday.
The main indices pared steeper losses toward the closing bell on Friday, with the Dow Jones Industrial Average down less than 1 percent.
“We’re two market days away from Election Day and people want to make sure that they’re not completely caught off guard,” said Pete Santoro, a Boston-based equity portfolio manager at Columbia Threadneedle Investments.
The S&P 500 has fallen about 8.9 percent since hitting an all-time high in early September in a rally driven by the tech mega-caps, whose quarterly results this week failed to meet highly optimistic expectations.
Apple Inc tumbled 5.6 percent after it posted the steepest drop in quarterly iPhone sales in two years due to the late launch of its new 5G smartphones.
Amazon.com Inc slid 5.45 percent after it forecast a jump in costs related to COVID-19, while Facebook Inc fell 6.3 percent as it warned of a tougher year ahead.
“All these names are eventually going to be repriced, they’re all ridiculously valued. It’s just that I don’t know when and I don’t know from what stratospheric valuation they inevitably reprice,” said David Bahnsen, chief investment officer at the Bahnsen Group in Newport Beach, California.
Communication services got a boost from a jump in shares of Alphabet Inc after the Google parent beat estimates for quarterly sales as businesses resumed advertising.
Google might have benefited, as it has been trading at about 36 times earnings, far less than the 119 times earnings valuation of Amazon, Bahnsens said.
“There is a big sell-off in those big tech names, because they didn’t live up to the hype and people are really worried about next week’s election,” said Kim Forrest, chief investment officer at Bokeh Capital Partners LLC in Pittsburgh, Pennsylvania.
Republican US President Donald Trump has consistently trailed former US vice president Joe Biden, the Democratic Party’s candidate, in national polls for months, but polls have shown a closer race in the most competitive states that could decide the election.
The Dow Jones Industrial Average on Friday fell 157.51 points, or 0.59 percent, to 26,501.6. The S&P 500 lost 40.15 points, or 1.21 percent, to 3,269.96 and the NASDAQ Composite dropped 274 points, or 2.45 percent, to 10,911.59.
For the week, the Dow fell 6.5 percent, the S&P 500 5.6 percent and the NASDAQ 5.5 percent.
For the month, the Dow slid 4.6 percent, the S&P 500 2.8 percent and the NASDAQ 2.3 percent.
The third-quarter earnings season is almost past its halfway mark, with 86.2 percent of S&P 500 companies topping earnings estimates, according to Refinitiv data.
Overall, profit is expected to fall 10.3 percent from a year earlier.
Twitter Inc, the largest S&P 500 decliner by percentage, slumped 21.1 percent after it added fewer users than expected and said that the US election could affect ad revenue.
Declining issues outnumbered advancing ones on the New York Stock Exchange by a 1.83-to-1 ratio; on NASDAQ, a 2.63-to-1 ratio favored decliners.
The S&P 500 posted three new 52-week highs and two new lows; the NASDAQ Composite recorded 22 new highs and 83 new lows.
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