The streak is going in the other direction now. After yesterday's S&P 500 Index (^GSPC 0.11%) 16-point sell-off ended a multi-day streak of gains, today's 0.85% decline will be just the second time in September the index has fallen in consecutive days.
Today's sell-off included the tech stocks that have been a big reason the index has fallen 6.3% since the early September all-time high, but it's far from the worst-performing of the 11 S&P sectors today. The biggest loser today is real estate, with 29 of the 31 real estate investment trusts (REITs) in the S&P 500 down today. The sector is down 2.2%, more than double the decline seen by tech stocks.
The unemployment line isn't getting much shorter. Image source: Getty Images.
Joining real estate in a big sell-off today was the consumer discretionary sector, especially retail stocks like e-commerce giant Amazon (AMZN +2.05%), home improvement giant Lowe's (LOW 1.45%), and fast-casual burrito seller Chipotle Mexican Grill (CMG 0.44%). All three declined around 2% or more in today's broad sell-off.
The only two sectors set to gain today are materials and industrials, and in large part for similar reasons to why many other stocks are falling: broad economic uncertainty, as the economy continues to suffer from massive unemployment, while the Federal Reserve continues to say it will prioritize keeping interest rates low for the foreseeable future, even if inflation moves higher.
Cheap money doesn't offset near-term economic worries for commercial real estate
Real estate is generally considered one of the safest counter-cyclical investments worth owning during recessions, with public REITs one of the only ways for most investors to build a real estate portfolio. And for REITs, which use a lot of debt to finance their properties, record low interest rates should prove a benefit in the years ahead.
Yet the massive implications of the coronavirus pandemic have upended much of the security of commercial real estate in 2020; millions of businesses small and large were forced to close their doors for weeks earlier this year, cutting off their cash flows and leaving many unable to pay their landlords. The ongoing recession, which has seen more than 800,000 people file for unemployment every single week since March, continues to impact many REITs as their tenants continue to struggle to make ends meet.
Today we saw investors send shares of cellphone tower operator American Tower (AMT 0.36%) (the second-worst S&P stock today), healthcare REIT Welltower (WELL +0.54%), and mall giant Simon Property Group (SPG +0.80%) down between 3% and 5%.
Today's knee-jerk move to sell could prove a buying opportunity, since this group in particular has proven able to weather the downturn. In the post-COVID-19 future, their ability to reward patient investors with substantial dividends should have REITs on most investors' watch lists.
Economic woes worry investors in retail stocks
Continued record levels of unemployment have investors backing away from some of this year's biggest retail winners. Today's sell-off included e-commerce stalwarts Amazon.com and eBay (EBAY 0.19%), Lowe's, and Chipotle. As a group, these companies have crushed the market in 2020, with the coronavirus pandemic helping them all accelerate their growth.
Today investors sold them all, sending their shares down between 1.7% and 3.5%. The consumer discretionary sector they all belong to declined 1.4% today. Fears that the millions of Americans who are out of work will weigh on the economy for the foreseeable future has many investors thinking these companies have more to lose if consumers tighten their belts going forward.
Thinking beyond COVID-19 is getting harder for investors
Much of the stock market narrative in the past few months has revolved around the post-COVID-19 economy, which has been expected to rebound very quickly once we have the treatments and vaccines necessary to return to normal economic and industrial activity.
However, with each passing week, the reality of when that could happen erodes more of the optimism that it will happen soon. While the FDA is working to set the stage for quick distribution of a coronavirus vaccine by November, the companies leading the race to bring a drug to market aren't likely to submit for FDA approval by that time.
As a result, investors aren't as likely to buy at today's prices on the thesis that the payoff will come when the pandemic is in the rearview mirror. Investors seem to be coming to grips with the reality that the coronavirus, and the implications of social distancing, remote work, limited commercial travel, and a struggling economy, could be with us longer than we wanted to believe a few months ago.
