The Dow Is Dropping Because Bad News Is Piling Up

Stocks are falling as cases of Covid-19 cases mount up around the globe, U.S. claims for unemployment benefits increase, and hope for government aid to prop up the economy fades.

The Dow Jones Industrial Average was down 0.9% near midday, while the S&P 500 was off 1%. The Nasdaq Composite had fallen 1.4%.

Initial claims for unemployment benefits were higher than expected for the latest week. That’s a concern, especially as U.S. lawmakers appear no nearer to another round of government aid, even as coronavirus cases continue to rise in the U.S. and Europe.

“It was only a matter of time before investors are no longer able to ignore the sharp increase in new Covid-19 cases and new restrictions being introduced throughout Europe,” wrote Milan Cutkovic, market analyst at Ax, saying a second European lockdown, which previously looked unlikely, can no longer be ruled out.

“So far it has mainly been the hope for new stimulus measures that has kept the optimism alive. On Wall Street, however, investors have now accepted that there will be no deal between the Republicans and Democrats over the stimulus package in the imminent future.”

As for individual stocks, Brinker International (EAT) was up 6.3% after an upgrade from BMO Capital Markets, which highlights its growing earnings power.

Roku (ROKU) fell 3.4% after Keybanc Capital Markets cut its rating on the stock, given pressure on its advertising revenue resulting from the pandemic.

Vertex Pharmaceuticals (VRTX) dropped 19.8% after stopping trials of a protein-deficiency treatment that had been seen as promising.

Walgreens Boots Alliance (WBA) gained 2.9%. It reported higher earnings than expected for its fiscal fourth quarter.

Write to Teresa Rivas at teresa.rivas@barrons.com