Wall Street sell-off picks up steam, Dow falls 400 points to cut into November’s big gain

Stocks fell sharply on Monday as investors cashed in some of the historically strong gains logged in November.

The 30-stock Dow Jones Industrial Average dropped 422 points, or 1.4%. The S&P 500 slid 1.1%, and the Nasdaq Composite traded lower by 1.3%.

Salesforce and Boeing led the Dow lower, falling 3.7% and 3.5%, respectively. Energy and consumer discretionary were the worst-performing sectors in the S&P 500, sliding 3.5% and 1.9%, respectively.

Market sentiment took a hit after Reuters reported that the Trump administration is weighing blacklisting Chinese leading chipmaker SMIC as well as national offshore oil and gas producer CNOOC. The move would limit their access to American investors and escalate tensions with China before President-elect Joe Biden takes over.

The blue-chip Dow has risen 11.3% so far this month, on pace for its best monthly performance since January 1987, as promising vaccine developments boosted confidence of a smooth economic reopening. The S&P 500 and the Nasdaq have climbed 10% and 10.3%, respectively, in November, both on track to post their biggest monthly advance since April.

Cyclical sectors, those most economically sensitive groups, have led the market’s November rally amid a slew of positive vaccine news. Energy, 2020’s biggest loser, has jumped 29% this month, while financials, industrials and materials have all gained at least 11% during this period.

Boeing and American Express led the way higher for the Dow, rising 47.6% and 31.6%, respectively, in November. Chevron, JPMorgan Chase, Disney, IBM and Honeywell each rose more than 20% this month.

Small caps have been on a tear this month as investors piled into beaten-down value names. The Russell 2000 has rallied 20.6% so far in November, on track for its best month ever.

“This rally has been notable as the rotation from Growth to Value has continued to gain momentum despite the negative news flow of Covid cases surging around the country and lockdowns again being imposed in various parts of the nation,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

More than 266,000 people have died from the coronavirus in the U.S., and more than 13 million cases have been confirmed in the country, according to data from Johns Hopkins University. Dr. Anthony Fauci, the nation’s top infectious disease expert, said on Sunday that the U.S. is heading into a tough period of the pandemic in which restrictions and travel advisories will be necessary.

Los Angeles County in California imposed a new stay-home order Friday as cases surged in the nation’s most populous county. Meanwhile, New York City public schools will begin to reopen on Dec.7.

However, Moderna said Monday that new trial data showed its Covid-19 vaccine candidate was more than 94% effective. The company added it plans to ask the Food and Drug Administration for emergency clearance later in the day. Moderna shares rallied 17%.

The market is coming off a record-setting holiday week that saw the 30-stock Dow surge past the 30,000 milestone for the first time. The S&P 500 and the Nasdaq both closed Friday at fresh record highs.

“The length and strength of the current rally suggests to us that the market could be vulnerable to some pullback at these levels,” wrote John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. “That said, the bull market that has emerged from the lows on March 23rd of this year has shown similarities to its predecessor … in having a predilection to climb walls of worry aided and abetted by monetary policy and secular trends deeply embedded in technology and globalization.”

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