Lockdown fears weigh on Dow, S&P 500; Nasdaq hits record high

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By Ambar Warrick and Devik Jain

(Reuters) – The Dow and the S&P 500 fell on Friday as fears of fresh lockdowns to curb the spread of COVID-19 in Europe hammered banking, energy and airline stocks, while strength in technology pushed the Nasdaq to a record high.

In Europe, a resurgence in COVID-19 cases saw Austria outline plans for a full lockdown, and fears that Germany could follow suit amid a new wave of infections rattled stock markets globally.

Banking stocks fell about 2.6%, tracking a drop in Treasury yields as investors snapped up safe-haven bonds. Financial was among the worst-performing S&P sectors for the day, down 1.7%. [US/]

Carriers including Delta Air Lines, United Airlines and American Airlines, and cruiseliners Norwegian Cruise Line and Carnival Corp fell between 1.3% and 4.4%.

Major oil firms dropped as crude prices fell on renewed concerns over European demand, pulling the S&P energy sector down 3.4%. [O/R]

“There’s some pandemic risk. However, I don’t believe that the U.S. will head in the direction like Austria. If Germany institutes a full lockdown, that would probably have an impact, again, to the supply chain,” said Tom Mantione, managing director, UBS Private Wealth Management in Stamford, Connecticut.

“The biggest risk here to the market is not legislative policy or pandemic … If the Fed chooses to react quickly and aggressively to persistent inflation, then the markets are going to have a problem.”

Inflation remains front and center for investors, with recent comments from Federal Reserve officials suggesting that inflation is becoming more broad-based and that expectations for future price increases are rising.

Falling yields supported major technology stocks, which in turn lifted the Nasdaq to a record high.

Alphabet Inc, Amazon.com and Microsoft Corp – stocks which have largely persevered through economic shocks since 2020 – rose between 0.3% and 1.2%, while Netflix and other stay-at-home stocks also gained.

Chipmaker Nvidia rose 3.2% in heavy trade after posting strong quarterly results late Wednesday.

The S&P 500 and the Nasdaq eked out record highs on Thursday following strong technology and retail earnings. The Nasdaq was set to be the best performer this week, while the Dow Jones was set for a second straight week of losses.

At 10:18 a.m. ET, the Dow Jones Industrial Average was down 221.55 points, or 0.62%, at 35,649.40 and the S&P 500 was down 0.52 points, or 0.01%, at 4,704.02. The Nasdaq Composite was up 82.12 points, or 0.51%, at 16,075.83.

President Joe Biden’s $1.75 trillion bill to bolster the social safety net and fight climate change passed the U.S. House of Representatives on Friday, sending it to the Senate where negotiations will continue.

Among other stocks, Intuit Inc jumped 12.6% as brokerages raised their price targets on the income tax software company after it beat quarterly estimates and raised forecast.

Moderna Inc and Pfizer Inc gained 6.1% and 2.0%, respectively, after the U.S. Food and Drug Administration authorized booster doses of their COVID-19 vaccines for all adults.

Applied Materials Inc dropped 3.2% after the chipmaker forecast first-quarter sales and profit below market estimates on supply chain woes.

Declining issues outnumbered advancers for a 1.47-to-1 ratio on the NYSE and for a 1.05-to-1 ratio on the Nasdaq.

The S&P index recorded 33 new 52-week highs and four new lows, while the Nasdaq recorded 52 new highs and 141 new lows.

(Reporting by Ambar Warrick and Devik Jain in Bengaluru; Editing by Maju Samuel)