27.10.202011:53 Forex Analysis & Reviews: Third wave: US stock market enters red zone

Long-term review

Exchange Rates 27.10.2020 analysis

On Monday, the US stock market showed negative dynamics amid fears of the third wave of the coronavirus epidemic. It seems that the day when everyone returns to normal life will not happen soon. Investors are also worried about the lack of progress in negotiations on the adoption of a new stimulus package.

The Dow Jones Industrial Average fell by 1.1% to 28.010 points. The S&P 500 lost 0.9% and the Nasdaq Composite decreased by 0.4%. All three indices showed a downward trend over the past two weeks.

In the United States, people have already started talking about the third wave of the coronavirus. The number of hospitalizations has doubled over the past month, and the death rate has been rising for the second week in a row. Thus, there is only one question: has the country's economy recovered enough over these months to withstand another wave of COVID-19? By the way, the number of initial applications for unemployment benefits is still almost 800 thousand per week. Moreover, while people are fighting for life, politicians are fighting for power, because a week is left before the US presidential elections.

Meanwhile, the number of new COVID-19 cases in the United States continues to break records. At the same time, Italy and Spain reintroduce new restrictive measures in order to stop the coronavirus spread.

Airline and cruise shares slumped. Thus, United Airlines Holdings Inc. lost 3.8% and American Airlines dropped by 3.3%.

The Economic Activity Index, calculated by the Federal Reserve Bank of Chicago, declined to its lowest level since April. The value of the CFNA indicator was 0.27 points compared to 1.11 points in August.

At the same time, the US new home sales decreased by 3.5% in September. According to the data, 994 thousand houses were sold in August. The indicator hit its highest level for the first time in 14 years. Sales rose by 3%, instead of 4.8% as it had been expected.

Shares of companies in the field of tourism and recreation showed the worst performance on Monday.

Hasbro Inc. shares dropped by 9.4%. Otis Worldwide Corp. lost 0.4%.

Dunkin 'Brands Group Inc. skyrocketed by 16.1% amid news that the American company, which owns the Dunkin 'Donuts and Baskin Robbins ice cream brands, is going to make a nearly $9 billion deal to be acquired by private equity firm Inspire Brands.

German commercial programming giant SAP cut its earnings forecasts as the pandemic has affected business costs and accelerated the move to cloud computing. In this case, the SAP margin is lower than in the traditional business. As a result, SAP shares plunged more than 20%. Salesforce shares also fell by 1.4%, driven by the same factors.

Meanwhile, yesterday, China implemented sanctions against Boeing and Lockheed Martin. The reason was a US deal with Taiwan to sell the latter weapons earlier this year. Finally, Boeing shares decreased by 2.6% and Lockheed shares lost 2.6% reaching a three-month low.

Kate Smirnova,
Analytical expert
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