By Yasin Ebrahim
Investing.com – The Dow plunged Monday, led by a slump in economy-sensitive value stocks as diminishing hopes of further stimulus raised concerns about the pace of the U.S. economic recovery.
The Dow Jones Industrial Average fell 2.28%, or 629 points. The S&P 500 was down 1.76%, while the Nasdaq Composite sliped 0.85%.
Value sectors of the market, which tend to outperform when the economy is prospering, fell sharply, with materials, industrials, and energy among the biggest leading to the downside.
Concern about the pace of the economic recovery comes as analysts warned that President Donald Trump's intention to press ahead with the replacement of the late Supreme Court Justice Ruth Bader Ginsburg would all but end the prospect of further stimulus.
"Trump has said he will announce his pick by Friday or Saturday while seeking a confirmation vote before the November 3rd election … this will result in a further lessening of chances at a US stimulus bill," Scotia Economics said.
The move would likely take up "precious time for the executive and calendar space in the Senate before the election at the expense of things like a stimulus bill," the firm added. "Even if quick resolution is achieved, however, the Democrats’ spirit of cooperation is likely to be further lessened as total election gridlock takes root."
Investor sentiment on stocks was also soured by rising U.S.-China tensions as Beijing reportedly is readying a list of U.S. companies to blacklist after Trump issued an ultimatum for a U.S. company to take over video-sharing app TikTok.
Technology stocks cut losses, however, with Microsoft (NASDAQ:MSFT) in the spotlight after announcing a $7.5 billion deal to buy ZeniMax Media, the parent company of game developer and publisher Bethesda Softworks.
With the exception of Apple (NASDAQ:AAPL), the other tech names, which make up the Fab 5, traded mostly lower, with Facebook (NASDAQ:FB) Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), and in the red.
In other news, Nikola (NASDAQ:NKLA) slumped 19% after its founder, Trevor Milton, stepped down and was replaced by former General Motors (NYSE:GM) executive Stephen Girsky.
The sharp losses on Wall Street come as the Covid-19 resurgence in Europe has raised concerns about a potential slowdown in global growth, which would dent the U.S. recovery.