Live Updates: Stocks Are Roiled as New Covid Strain Overshadows Stimulus

Markets

Financial markets were jolted on Monday by the news that a fast-spreading variant of the coronavirus had led to the suspension of some trade and travel with Britain and another lockdown in London, a new threat that overshadowed progress in Washington toward a long-awaited economic aid package.

But Wall Street’s major benchmarks bounced off their lowest levels of the day, with the Dow Jones industrial average recouping all of its losses and the S&P 500 index down a little more than half a percent by 1 p.m. in New York.

The retreat was sharper in Europe, where the Stoxx Europe 600 index dropped 2.7 percent. The FTSE 100 in Britain fell 1.7 percent, while the FTSE 250, which includes companies that are more oriented to the British economy, declined more than 2 percent.

The British pound fell against all other major currencies. It declined as much as 1.8 percent against the dollar. Crude oil prices were nearly 4 percent lower, but also off of their worst levels of the day.

Over the weekend, nearby countries shut their borders to travelers from Britain as London and the surrounding area were put into a lockdown after the government’s health secretary said a new strain of the coronavirus was “out of control.” France also stopped freight imports from Britain, a move that will worsen border disruptions and has raised concerns about the supply of fresh food.

By Monday, some countries outside of Europe also began to close their borders to travelers. Israel said most foreign nationals wouldn’t be allowed to enter, while Saudi Arabia announced a one week ban on all international travel.
But concern about the economic impact of such restrictions didn’t weigh on Wall Street quite as heavily as it did in Europe, in part because of the fact that congressional leaders have reached a deal on a $900 billion stimulus package, which is expected to include $600 stimulus payments to millions of Americans and strengthen unemployment benefits.

The congressional spending package is expected to include most of the elements that economists have long said were crucial to avoiding further calamity and aiding a recovery. It extends unemployment benefits for millions at risk of losing them, and adds money to their checks to help pay their bills. It revives the Paycheck Protection Program, which kept many small businesses afloat last spring.

Trading in the U.S. did reflect some concerns about the new restrictions in Europe. Shares of Airlines, cruise lines and casinos — companies that will be hardest hit by travel restrictions — fared poorly. As crude oil prices retreated, reflecting worry about the global economy, energy stocks were also amng the worst performers.

But another factor was also weighing on the S&P 500 on Monday — the addition of Tesla to the index.

With a market cap of more than $600 billion, Tesla is the largest ever addition to the index, requiring roughly $90 billion worth of trading as fund managers who have to try and match their holdings to the index have to sell other stock.

Gainers were concentrated in the financial sector, after the Federal Reserve on Friday said that the country’s largest banks were sturdy enough financially to survive a severe economic shock related to the pandemic. The Fed will allow them to return more money to shareholders in early 2021 as long as the banks show that they are profitable.

Goldman Sachs rose over 7 percent, Morgan Stanley jumped nearly 6 percent and JPMorgan Chase climbed more than 4 percent.

U.K. Virus Crisis

British shoppers were warned Monday of the possibility of a “serious disruption to U.K. Christmas fresh food supplies” stemming from France’s decision to suspend all trucks arriving from Britain.

Consumers were advised by trade groups not to panic shop in the days leading to Friday’s Christmas holiday.

France is trying to stop the spread of a more contagious strain of coronavirus that Britain’s health minister said had grown “out of control” in parts of England. Over the weekend, Prime Minister Boris Johnson announced tighter restrictions on people living in London and the surrounding area.

On Sunday night, France suspended the…