The S&P 500 index (SNPINDEX:^GSPC) is down almost 80 points, a 2.3% decline, with less than two hours remaining in the trading session on Oct. 26. Today's sell-off comes on growing uncertainty across the economic, political, and health spectrum. Congress and the Trump administration remain at loggerheads over much-needed economic stimulus for the thousands of businesses barely hanging on and the millions of Americans out of work. Cases of COVID-19 are also on the rise, following experts' predictions that the onset of cooler autumn weather would lead to another wave of the deadly pandemic.
Today's prize for biggest loser goes to cruise giant Royal Caribbean (NYSE:RCL), with shares down 10.3%. Toy maker Hasbro (NASDAQ:HAS) joined the cruise into a sea of red with shares down 10% after reporting third-quarter earnings. The oil patch hit another slick, with the Energy Select Sector SPDR ETF (NYSEMKT:XLE) losing almost 4% as crude oil prices fell sharply on a combination of pandemic-driven demand worries and supply side pressures.
On the -- very modest -- upside, investors looked to be moving into safer sectors. Today's best S&P stock was electric utility American Electric Power (NYSE:AEP), up 2.4%, with no other stock gaining even 2%. The utility sector was the only one to come close to breaking even today, with every other sector falling 1.3% or more.
Oil stocks at risk from both supply and demand
Crude oil prices fell more than 3% Monday, moving West Texas Intermediate crude futures back solidly below $40 per barrel as investors weigh the significant risks of another wave of coronavirus cases sending oil demand lower, just as Libya gets set to bring another half-million barrels of oil per day back to the market. After spending most of the year producing essentially no oil for international markets, Libya has brought its oil infrastructure back online over the past six weeks, and is expected to grow its output from approximately 500,000 barrels per day at recent levels back to nearly 1 million barrels per day within one month.
With pressures on both supply and demand, investors are once again getting out of the oil patch. Every energy stock in the S&P 500 is falling today, and the worst performers are by far independent oil producers. Apache (NASDAQ:APA) shares are down 8.7%, with Marathon Oil (NYSE:MRO), EOG Resources (NYSE:EOG), and ConocoPhillips (NYSE:COP) shares all down 7% or more. Investors should continue to step lightly in the oil patch.
Second coronavirus wave and no second stimulus have travel stocks sinking
Royal Caribbean wasn't the only cruise stock to fall today, with Norwegian Cruise Line Holdings (NASDAQ:NCLH) and Carnival (NYSE:CCL) (NYSE:CUK) both falling more than 8% today. Alaska Air Group (NYSE:ALK) and United Airlines Holdings (NASDAQ:UAL) shares both fell more than 7.5%, while Delta Air Lines (NYSE:DAL) and American Airlines Group (NASDAQ:AAL) fell 6% or more.
No two industries have become more identified as being tied to the hopes for government stimulus and a post-coronavirus recovery than commercial air travel and the cruise industry. Today, Congress is getting ready to head into recess, taking those hopes with them, particularly for the airlines, which have been expected to be beneficiaries of a second stimulus package that would cover at least a portion of their labor expenses. For cruise stocks, the rising number of COVID-19 cases is expected to once again delay cruise operators' ability to return to the open seas with paying customers. The Centers for Disease Control and Prevention could extend its "no-sail" order on ships operating out of U.S. ports, while similar bans could follow in other countries where COVID-19 cases are again on the rise.
The reality for both industries is that the coming months, stimulus bill or not, second wave or not, were never going to be very good. Barring medical treatments and wide-scale vaccines, confined travel isn't likely going to be on enough bucket lists to make either industry profitable. The top companies have already accessed enough capital to ride out the pandemic well into 2021, but it's hard to call either industry particularly compelling in the current environment.
Increasing cases of COVID-19, little hope of a pre-election stimulus deal, and highly contentious elections only eight days away, in the midst of earnings season, could prove a perfect storm for increased volatility in the week ahead. Hasbro is an excellent example, making the "mistake" of reporting mixed results, and then offering no clear outlook on the coming quarter on a day when investors were already spooked.
What's an investor to do?
A great place to start is to remember what you own, and why you own it. The market's volatility and worries may cause some short-term pain, but owning great companies for years can pay off with long-term gains. Don't let the tail wag the dog in this season of uncertainty.