A rise in coronavirus cases in the United States, new restrictions on activity in Europe and a standoff in Washington over aid for struggling businesses and out-of-work Americans left investors reeling on Monday.
The S&P 500 fell 1.9 percent in Wall Street’s worst day in over a month.
“You can only pretend that Covid was not a problem for so long,” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn. “I think the market has finally kind of gotten it through its head, at the same time, that there’s very little shot at stimulus.”
Shares in Europe also ended lower as more limits were introduced to try to combat a second wave of the coronavirus pandemic. In Spain, the government declared a state of emergency and imposed a nighttime curfew. In Italy, cinemas and gyms are closing and indoor dining ending at 6 p.m. In France, a six-week curfew for most of the country began on Friday.
SAP, the giant German business software company, on Sunday reported disappointing earnings, saying that demand for its products, particularly relating to business travel, was recovering more slowly than expected because of the new lockdowns. Its shares fell more than 20 percent on Monday.
“The real disappointing news is out of SAP,” said Matt Maley, chief market strategist at Miller Tabak, an asset management firm. “Their guidance is giving investors a reality check about what a renewed round of lockdowns will have on earnings.”
Several large American technology companies with similar businesses fell after SAP’s report. Hewlett Packard Enterprise dropped 4.4 percent. Oracle dropped 4 percent. IBM fell 3.3 percent.
Tourism-related stocks like cruise-ship operators and airlines were also hammered on Monday. These companies have suffered the most from lockdowns, travel restrictions and the drop in demand for flights, cruises and hotels as consumers around the world are encouraged not to take unnecessary risks. And their share prices have become something of a bellwether for investor sentiment toward the pandemic.
Royal Caribbean Cruises and Norwegian Cruise Line were down 9.7 percent and 8.5 percent, putting them among the worst-performing stocks in the S&P 500. United Airlines fell about 7 percent, while Marriott International dropped 5.6 percent.
Worry spread to other markets as well, with crude oil futures down more than 3 percent.
Coronavirus case numbers have risen to new highs in the United States in recent days. At the same time, the prospects of more assistance for shuttered businesses and laid-off workers have dimmed considerably with the presidential election just eight days away.
Over the last couple of weeks, the outside chance that a last-minute stimulus package could be cobbled together by congressional Democrats and the White House has helped to offset concerns about the pandemic and fueled gains in stocks. But that optimism began to fade late last week as talks failed to advance, and, combined with the worsening virus, set off the sell-off Monday, analysts said.
“It’s a perfect recipe for a market pullback,” said Doug Rivelli, president of the institutional brokerage firm Abel Noser in New York.
Economists have warned that government spending is crucial to ensuring that the American economy is able to bounce back from the coronavirus crisis.
The political climate, with things as diverse as concern about a contested election and the potential vacuum of information that could follow Election Day as votes are still counted, has also increased turbulence on Wall Street lately.
Stocks rallied earlier this month on the expectation that a clean sweep by Democrats could lead to a more clear-cut outcome and a wave of government spending to prop up the economy.
But with the losses on Monday factored in, most of those gains have been erased, and the S&P 500 is now about 5 percent below a high it reached in early September.
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