S&P 500 sinks 3.5% as surging virus cases threaten shutdowns

NEW YORK — The Dow Jones Industrial Average dropped 943 points Wednesday as surging coronvirus cases in the U.S. and Europe threaten more business shutdowns and pain for the economy. The S&P 500 dropped 3.5%, its third straight loss. The index has now given up 5.6% so far this week and is on track for its biggest weekly fall since March, when markets were in a downward spiral. European markets also sank. Crude oil prices fell sharply as investors anticipated that demand for energy will weaken along with the economy. Treasury yields fell as investors sought shelter in safer assets.

THIS IS A BREAKING NEWS UPDATE: AP’s earlier story appears below.

Stocks around the world are tumbling Wednesday on worries the worsening pandemic will mean more restrictions on businesses and drag down the economy.

The S&P 500 was down 2.7% in afternoon trading on Wall Street and is headed for a third straight loss. It’s already down 4.8% this week and threatening to post its biggest weekly fall since March. That’s when the market was in the midst of selling off as strict lockdowns around the world choked the economy into recession.

The Dow Jones Industrial Average was 771 points lower, or 2.8%, at 26,691, as of 2:30 p.m. Eastern time, and the Nasdaq composite slumped 2.8%. The selling was widespread, and roughly 95% of stocks in the S&P 500 were lower.

Markets were dropping even more sharply in Europe, where investors expect the French president to announce tough measures to slow the virus’ spread and German officials agreed to impose a four-week partial lockdown. The measures may not be as stringent as the shutdown orders that swept the world early this year, but the worry is they could still hit the already weakened global economy.

Policymakers in Europe “must choose between low unemployment or low COVID transmission rates. Unfortunately, they are now left dealing with the most sensitive currency of them all, people’s lives,” Stephen Innes of Axi said in a report.

In European stock markets, Germany’s DAX lost 4.2%, and France’s CAC 40 dropped 3.4%. The FTSE 100 in London fell 2.6%.

Coronavirus counts are also climbing at a troubling rate in much of the United States, and the number of deaths and hospitalizations due to COVID-19 are on the rise. Even if the most restrictive lockdowns don’t return, investors worry that the worsening pandemic could scare away customers of businesses regardless and sap away their profits.

Stocks of companies that most need the virus to abate for their businesses to get back to normal were slumping to some of the sharpest losses. Cruise operators Carnival and Norwegian Cruise Line Holdings fell at least 7%, while Royal Caribbean fell 4.8%. Delta Air Lines lost 4.1%. Live Nation Entertainment, which depends on customers going to concerts and other events, slid 3.6%.

Crude oil also tumbled on worries that an economy already weakened by the virus would consume even less energy and allow excess supplies to build higher. Benchmark U.S. crude dropped 5.7% to $37.32 per barrel. Brent crude, the international standard, fell 5.4% to $39.37 per barrel.

Instead, investors headed into the safety of U.S. government bonds. The yield on the 10-year Treasury note fell to 0.78% from 0.79% late Tuesday. It was as high as 0.87% last week.

A measure of fear in the stock market touched its highest level since June, when the market suddenly tumbled amid concerns that a “second wave” of coronavirus infections had arrived. The VIX measures how much volatility investors expect from the S&P 500, and it climbed 18.3% Wednesday.

Even the continued parade of better-than-expected reports on corporate profits for the summer failed to shift the momentum.

Microsoft, the second-biggest company in the S&P 500, reported stronger profit and revenue for its latest quarter than expected. That’s typically good for a stock, but Microsoft nevertheless slumped 4.1%. It gave a forecast for the current quarter that was relatively in line with Wall Street forecasts, but analysts noted some caveats in it.

UPS fell 7% after also reporting better-than-expected earnings, though it said the outlook for its business is too cloudy due to the pandemic to offer any forecasts for its revenue or profits in the current quarter.

Among the few winners was General Electric, which jumped 8% after reporting stronger profit and revenue for the latest quarter than expected. Automatic Data Processing rose 7.4% after its profit report also topped expectations.

Companies broadly have not been getting as big a pop in their stock prices as they typically do after reporting healthier-than-expected profits. Analysts say that suggests good news on profits has already been built into stock prices and that the market’s focus is elsewhere.

Investors’ hopes that Congress and the White House could soon offer more big support for the economy as it struggles through the pandemic have largely faded. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have continued their talks, but investors see little chance of a deal happening before Election Day next week.

Economists say the economy likely needs such aid after the expiration of the last round of supplemental unemployment benefits and other stimulus approved by Washington earlier this year.

Uncertainty about the upcoming presidential election has also been pushing markets around.

“The market never likes uncertainty,” said Stephanie Roth, portfolio macro analyst at J.P. Morgan Private Bank. “People are just taking profits ahead of the election, to some extent.”

The race seems be getting tighter than it was just a few weeks ago, said Jamie Cox, managing partner for Harris Financial Group. “It has markets somewhat unnerved that the prospects of a contested election are back in the mix,” he said.

Cox said he expects more calm in the markets in November after the election passes and some of the uncertainty over a new aid package fades.

“Aid is coming regardless. There’ll be no political motivation to hold it back after the election,” he said. “There’s plenty of desire to get money out to people so I think it will happen one way or another in November.”

In Asian stock markets, trading was mixed. Japan’s Nikkei 225 fell 0.3%, and Hong Kong’s Hang Seng also lost 0.3%. South Korea’s Kospi gained 0.6%, and stocks in Shanghai rose 0.5%.

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AP Business Writer Yuri Kageyama contributed.