Dow plunges 500 points as tech tumbles, stocks hit session lows

What’s driving the market?

Stocks slid further into the red Wednesday afternoon, extending the selloff from Monday, which took the S&P 500 within a whisker of a correction—defined as a 10% pullback from a recent peak.

“In big tech, a lot of the growth and momentum in stocks that exploded through the end of August, a lot of that’s retracing,” said Sahak Maneulian, head of equity trading at Wedbush Securities, in an interview. But volatility
VIX,

 also has made a comeback, he said, following a long period of dormancy. “We’re in the technical downdraft and it’s very hard to get out of as we get closer to the election and year-end.”

Equities briefly caught a footing in Tuesday’s session, but were tumbling again Wednesday amid deep-seated divides in Washington over additional pandemic aid and a resurgence of coronavirus cases in Europe and parts of the U.S., including in Texas, Wisconsin, Oklahoma and Colorado.

“There’s been a worry about what happens going into the fall and winter. That’s on investors mind,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, of rising COVID-19 cases and political unease ahead of the Nov. 3 general election.

“But I also think investors are reluctant to keep their feet completely out of the market,” he told MarketWatch, pointing to expectations for a safe and effective vaccine to be available at some point next year.

Johnson & Johnson
JNJ,

on Wednesday announced the start of a 60,000-person clinical trial of its single-dose COVID-19 vaccine on three continents, making the drugmaker the fourth experimental vaccine candidate to enter final-stage testing in the U.S.

Skeptics said Tuesday’s brief turnaround for stocks was unconvincing, particularly given the still elevated stock values against a backdrop of tremendous uncertainty.

“It’s not a surprise it’s becoming a little more volatile heading into the election,” Esty Dwek, head of global macro strategy at Natixis Investment Management, told MarketWatch. “But right now it’s kind of more about Congress.”

“After Justice Bader Ginsburg’s passing, the probability of another fiscal package before the election has become quite small.”

Related: Coronavirus deal prospects, already dim, recede further with pact to keep government open

The U.S. presidential election remains only weeks away. The “tight race, combined with worries about fraud from postal voting, has sparked talk that whoever loses will contest the result, leading to a potentially prolonged period of uncertainty,” said Raffi Boyadjian, senior investment analyst at XM, in a note.

Simmering tensions between the U.S. and China also remain a potential source of weakness for stocks, he said, noting that Trump used his address on Tuesday at the annual U.N. General Assembly to blame China for “unleashing” the coronavirus onto the world, while Beijing looks increasingly likely to block the takeover of TikTok by U.S. companies, potentially heightening the standoff.

Volatility will be “on a steady upward march” for the next several months, said Peter Andersen, founder of Andersen Capital Management, in an interview. Investors are also faced with a litany of unknowable s over the coming months, he noted: the outcome of the November election and the likely protest against it, the timing and rollout of a vaccine, the tone of any civil unrest, and more.

Andersen suggests putting aside the binary questions that many analysts follow—value versus growth, reopening versus lockdown, richly valued versus underpriced—and building a portfolio that doesn’t try to time the market. “I tell investors to focus on stocks that almost have an organic demand for products and services that will remain strong no matter what the election results, the vaccine hysteria, and the national polarization.”

Opinion:The TikTok geopolitical soap opera is a confusing mess—even by Trump standards

Federal Reserve Vice Chairman Richard Clarida said Wednesday that policy makers won’t contemplate raising interest rates until inflation is clearly back at 2%—and possibly even beyond. Randal Quarles, the Fed’s vice chairman for banking supervision, said he’s optimistic about the outlook but also agreed with Fed Chair Powell that continued support will be required to sustain a robust recovery, in a Wednesday speech.

A September composite purchasing managers index flash reading from IHS slipped to 54.4 in September from 54.6 in the prior month, signaling a slower pace of growth. The flash services purchasing managers index inched down to 54.6 from 55 in August. The flash manufacturing index rose to 53.5 in September from 53.1 in the prior month, still marking a 20-month high.

Read: How far do stocks have to fall for Washington to take action? You may not like the answer

Which companies are in focus?

• Shares of Dow component Nike Inc..
  NKE,
  
   jumped more than 7% after the athletic apparel company delivered results late Tuesday that easily beat Wall Street forecasts.
• Stitch Fix Inc.
  SFIX,
  
   shares slid 17% after the provider of clothing and accessories subscriptions reported a bigger quarterly loss than expected.
• Shares of Johnson & Johnson
  JNJ,
  
  were up 0.3%, after the health care and pharmaceutical company said it had launched a global Phase 3 trial of its COVID-19 vaccine candidate.
• Shares of Tesla Inc.
  TSLA,
  
   fell about 11% after the electric-auto maker unveiled innovations and increased efficiencies that appeared to disappoint investors late Tuesday at its “Battery Day” event.
• KB Home
  KBH,
  
  shares were more than 8% lower despite a pair of price-target increases.
• General Mills Inc.
  GIS,
  
  shares were 0.5% lower after the cereal maker beat on earnings and hiked its dividend.

What are other markets doing?

The yield on the 10-year Treasury note
TMUBMUSD10Y,

was up a basis point at 0.67%. Bond prices move inversely to yields.

The ICE U.S. Dollar Index
DXY,

 was up 0.4% at 94.36.

Gold futures
GCZ20,

 slid 2.1% to settle at $1,868.40 an ounce to their lowest in two months. Oil futures
CLX20,

fell 0.2% to trade near $39.74 per barrel on the New York Mercantile Exchange, reversing an earlier gain.

The pan-European Stoxx Europe 600 Index
SXXP,

closed 0.6% higher and the U.K.’s benchmark
FTSE,

gained 1.2%. In Asia, Hong Kong’s Hang Seng Index
HSI,

rose 1% and the Shanghai Composite Index
SHCOMP,
,
closed 0.2% higher. Japan’s Nikkei
NIK,

slipped less than 0.1%.

William Watts contributed reporting.