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Wall Street tumbles amid bank allegations, rising COVID-19 rates

Airline industry presses for more aid
Airline industry presses for more aid 03:06

Wall Street is opening sharply lower, led by financial stocks, after a report alleged banks were profiting from illicit dealings with disreputable people and criminal networks. JPMorgan is down 3.3%, Deutsche Bank fell 7.6%. 

The prospect of tougher restrictions on public life in Europe to limit coronavirus cases is also weighing on stocks, particularly in the travel sector. In the U.S., daily COVID-19 cases are once again rising, reversing earlier progress in slowing the spread of the disease. 

In afternoon trading, the S&P 500 fell 71 points, or 2.1%, to 2,347 while the Dow declined 773 points, or 2.8%, to 26,885. The tech-heavy Nasdaq lost 137 points, or 1.3%.

Investors were spooked by a report from BuzzFeed News and the International Consortium of Investigative Journalists that alleges banks such as JPMorgan and Deutsche Bank had moved money for suspected criminals. 

More broadly, the economy is facing headwinds as the coronavirus pandemic continues to spread. The stalemate in Congress over another stimulus package is also adding to worries about economic growth. 

"Congress has struggled recently to reach an agreement on an additional aid package," noted Bruce A. Bittles, chief investment strategist at Baird, in a research note. 

He added, "Millions of Americans are still out of work. Many small businesses are suffering and state and local governments are experiencing shortfalls. We need the additional aid package in order to secure this economic recovery."

Travel stocks

Shares in travel stocks were hit particularly hard after British authorities warned about an exponential growth in the number of new coronavirus cases. Prime Minister Boris Johnson later this week is expected to announce a slate of short-term restrictions that will act as a "circuit breaker" to slow the spread of the disease.

The number of cases has been rising quickly in many European countries and while authorities don't seem ready to return to the tough restrictions on public life that they imposed in the spring, the new wave of the pandemic threatens the economic outlook.

Likewise, COVID-19 cases in the U.S. averaged more than 40,000 per day this week, a 17% jump from the prior week, according to Raymond James analysts. American Airlines declined 5.5% in early trading, while United Airlines plunged 8%. 

Election tension

Global markets have recovered most of this year's losses, though the bulk of gains went to big tech and some other stocks, while most issues still are down.

Investors have been encouraged by central bank infusions of credit into struggling economies and hopes for a vaccine to end the coronavirus pandemic that plunged the global economy into its deepest downturn since the 1930s.

But market momentum has faded with a rise in virus cases and after the Federal Reserve said last week that the U.S. economic outlook is uncertain. U.S. lawmakers also have yet to agree on a new support package ahead of elections for president, Congress and some Senate seats.

"With 43 days to the U.S. election, fingers crossed may be what little one can do when it comes to the fiscal stimulus hopes," said Jingyi Pan of IG in a report.

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