A late reversal dragged Wall Street lower on Tuesday, delaying the S&P 500’s return to a record by at least another day as shares of large technology companies weighed down the broader market.
The S&P 500, which came close to hitting its Feb. 19 high of 3386.15 earlier in the day, was down nearly 1 percent. The Nasdaq composite fell by more than 1.5 percent.
The pullback was striking because stocks had been higher for most of the day, after climbing for seven consecutive sessions. It came after the Senate majority leader, Mitch McConnell, said on Fox News that talks over a new spending plan to bolster the economy had reached a stalemate. After federal unemployment benefits and a moratorium on evictions expired last month, lawmakers have proved unable to reach an agreement on the further spending that many economists say is vital to protecting the economy from an even sharper downturn.
Shares of some of the biggest technology companies — like Apple, Amazon, and Microsoft — continued to weigh on the market on Tuesday. Those firms, with gigantic market values, have soared this year, as investors bet heavily that their business model put them in position to dominate the stay-at-home economy.
And because their enormous market capitalization — Apple is flirting with the never-before-seen level of $2 trillion — gives them outsize influence in market-cap weighted indexes such as the S&P 500, their declines this week have ensured that the overall gains for the index have been muted.
Still, Tuesday’s pullback was small and comes after the S&P 500 had climbed about 50 percent from its lowest point in late March. That rally has been fueled by a handful of factors: the Federal Reserve’s pledge to do whatever it takes to back the economy, high levels of spending by Washington and a rally in the shares of large technology companies.
But the broad gains have also discounted a number of threats to the rosy outlook suggested by the record. Policymakers have warned that some of the damage caused by the pandemic, in particular the closure of small businesses and job losses, will not be undone so quickly.
Big retail chains are closing their doors and filing for bankruptcy on a regular basis, and the pace of hiring has slowed: Employers added 1.8 million jobs last month, well below the 4.8 million jump in payrolls in June.
The Russian economy plunged into a deep contraction in the second quarter, shrinking 8.5 percent compared with the same period a year earlier, as the country coped with restrictive coronavirus lockdowns, the state statistics agency reported Tuesday.
But it was not the steepest quarterly drop on record for Russia, in contrast with the second-quarter plunge in other major economies, including the United States. In the post-Soviet period, Russia’s output fell faster twice before, during economic crises in 1998 and 2009. The drop in the second quarter of 2009, for comparison, was 11.2 percent.
The country is no stranger to boom and bust cycles, as its economy depends heavily on the volatile global prices for oil, a major export commodity. Oil prices plunged in the second quarter, partly because of a steep fall in demand because of the coronavirus pandemic.
The Russian statistics agency said the slowdown hit all sectors of the economy other than agriculture. Oil and mining, a backbone of Russia’s economy, suffered in particular, the agency said.
The slump has reverberated in Russian politics. President Vladimir V. Putin’s popularity has slumped, and a post-lockdown protest movement gained traction in the Siberian city of Khabarovsk. Output picked up and oil prices have recovered over the summer. The Russian ministry of economy has estimated that the economy will decline 4.8 percent for the full year.
Airline stocks jumped for a second day on Tuesday, after government data showed that travel has picked up in recent days.
Southwest Airlines was one of the best performing stocks in the S&P 500 with a gain about 3 percent. Delta Air Lines and American Airlines were also climbing, adding to Monday’s gains of more than 7 percent.
The gains come after Transportation Security Administration data showed that the agency screened more than 830,000 people at its airport checkpoints on Sunday, about 31 percent of the number screened on the same day last year. By that relative measure, it was the third best travel day of the pandemic, behind only the days leading up to the July 4 holiday.
While a relative high point, the number of passengers screened on Sunday is a figure that highlights the severity of the slump in travel that airlines still face.
But, in part because it shows that the most recent surge in coronavirus cases nationwide hasn’t deterred some travelers, the data was taken as good news. Passenger screenings on Monday continued the trend.
The screening data and stock increases are positive developments for an industry undergoing one of the worst financial crises in its history. Airline share prices are still about half of what they were in February and the number of people flying is unlikely to come even close to 2019 levels for another few years. Last month, United Airlines said it didn’t expect demand to recover any more than 50 percent until a vaccine is widely distributed.
Airlines are also preparing for a day of reckoning on Oct. 1, when a federal moratorium on mass layoffs that was part of a stimulus package is lifted. Tens of thousands of workers are expected to be laid off, though a union-led effort to extend the funding that protected their jobs has won bipartisan support in Congress and the White House.
SoftBank on Tuesday announced that it had swung back into the black, posting a $12 billion net profit for the three-month period that ended in June. Just four months ago, the company had announced one of the largest annual losses of any firm in the history of corporate Japan. But asset sales and a hot stock market helped fuel a rebound for the beleaguered Japanese conglomerate, which runs the world’s largest tech fund.
Hertz Global Holdings reported on Monday that its global revenue plummeted 67 percent in the second quarter from the year before, a decline that contributed to an $847 million loss and the car rental company’s decision in May to file for bankruptcy. The company said business improved ahead of the Fourth of July holiday, but a rise in coronavirus cases across the South and West has since slowed demand again.
WarnerMedia began a significant round of layoffs on Monday that will see its ranks decline by 600 people, according to two people with knowledge of the layoffs who were not authorized to speak publicly. The majority of the job losses were at Warner Bros. Entertainment. More layoffs are expected, the people said. The company has a global work force of 7,000. WarnerMedia’s new chief executive, Jason Kilar, is realigning WarnerMedia to put more emphasis on its new streaming service, HBO Max, which pulled in 4.1 million subscribers in its first month.
Even with a vast and costly government furlough program, the British labor market recorded its largest drop in employment since 2009 last quarter. Between April and June, when the country was under tight restrictions to control the spread of the coronavirus, the number of people with a job fell by 220,000 from the preceding quarter, official statistics showed on Tuesday.
The job losses hit those under 25 and over 65 disproportionately, according to the Office for National Statistics.
Though the unemployment rate held at 3.9 percent, that disguises the widespread impact of the pandemic. The jobless rate counts only people who are actively looking for another job, so it does not include those who are furloughed or don’t think they can find a job.
The statistics agency also said there was a record low number of hours worked in the quarter. The number of people who work with no minimum hours per week, on so-called zero-hour contracts, increased 17 percent compared with a year ago, to over a million. And pay fell, the first decline in pay not adjusted for inflation since records began in 2001.
The Office for National Statistics estimated that in June, 7.5 million people were temporarily not working, including furloughed employees.
There was a small increase in job vacancies among small businesses in July, but this positive sign could be dwarfed by a surge in layoffs as the furlough program is wound down. One-third of British businesses said they expected to cut jobs by the end of September, according to a survey by the Chartered Institute of Personnel and Development and the Adecco Group. Debenhams, a chain of more than 100 department stores, said on Tuesday that it was cutting 2,500 jobs.
State officials on Monday said they didn’t know how President Trump’s plan to provide a $400 supplement to unemployment payments would work. Mr. Trump’s action called for most recipients to get an extra $300 a week from federal disaster funds, leaving the states to supply $100.
Funds to cover the state’s portion “simply does not exist,” said Gov. Gavin Newsom of California, a Democrat.
Gov. Tate Reeves of Mississippi, a Republican, said he had not decided whether to take part in the program because of concerns over the cost. “This is not as easy of an answer as some might think,” he said.
Companies had a similar reaction to the idea of deferring payroll taxes until the end of the year. Many companies and employees might be hesitant to opt into what the president called a tax holiday because it is not clear whether Congress will eventually forgive the deferred taxes, or if the full sum will be due at a later date.
“We’re awaiting guidance from the U.S. Treasury Department on the payroll tax deferral, and we’ll make decisions on implementation once that’s been provided,” said Randy Hargrove, a spokesman for Walmart, the country’s largest private employer, with 1.5 million workers.
One option some employers might consider is to continue withholding the tax and repay workers later if it is eventually forgiven. That option would, of course, defeat the purpose of stimulating the economy now when it could use the help.
With the historic economic turmoil caused by the coronavirus comes the potential for even worse inequality. Major companies have created a new effort, accelerated by the pandemic, to work with universities, the city and other groups to create new curriculums and apprenticeships over the next decade, reports David Gelles:
A coalition of 28 major companies including Mastercard, Marriott and Verizon has pledged to hire 100,000 low-income and Black, Latino and Asian workers in New York City over the next 10 years, part of a broader push by corporate America to expand economic opportunities to marginalized communities.
The companies are funding the creation of a nonprofit organization, the New York Jobs C.E.O. Council, which they say will work with universities, the city government and other nonprofit groups to prepare a new generation of New Yorkers for high-paying jobs at some of the country’s biggest companies.
Details are scant, but the initiative has attracted the support of many of the most powerful chief executives in the country, including Jeff Bezos of Amazon, Laurence D. Fink of BlackRock, Satya Nadella of Microsoft and Sundar Pichai of Google.
Those involved with the new group say it will work to develop programs intended to prepare low-income and minority students for jobs at the companies.
“It might be that they help us create curriculum,” said Félix V. Matos Rodríguez, chancellor of the City University of New York. “It might be that they help us create apprenticeships.”