By Geoffrey Smith
Investing.com -- U.S. stocks opened sharply lower on Monday, with investors dumping cyclical stocks in particular after a brief and heady run of outperformance in the latter half of May.
Reports of fresh outbreaks of Covid-19 in Beijing and Tokyo further inflamed nerves at a time when a number of U.S. states have also witnessed rising numbers of new cases. The drip-feed of such news has raised fears of a second wave of infections.
By 9:35 AM ET (1335 GMT), the Dow Jones Industrial Average was down 654 points, or 2.6%, at 24,951 points. The S&P 500 was down 2.0% and the Nasdaq Composite was down 1.4%, regaining its more familiar role as the best performing of the three indices as investors sought safety in those companies with the most reliable growth prospects in the post-Coronavirus world.
Such stocks included children's media company Genius Brands (NASDAQ:GNUS), whose stock rose 7.9% after the company announced that Arnold Schwarzenegger, the star of the Terminator series of movies and subsequently Governor of California, had agreed to become a significant investor. Schwarzenegger will accept warrants on Genius Brands stock in return for his role starring in and producing the company's cartoons.
They also included biotech company Shopify (NYSE:SHOP) stock, which rose 5.1% after it announced a strategic partnership with Walmart (NYSE:WMT) under which the big box retailer will add some 1,200 of Shopify's sellers to its own e-commerce marketplace. Shopify stock has now roughly doubled this year.
By contrast, the sharpest losses came among more traditional companies whose business models had been rocked by the coronavirus pandemic, travel stocks above all.
United Airlines (NASDAQ:UAL) stock led the rest of the airline sector lower, after the company warned that it expects to burn an average of $40 million a day in the current quarter, narrowing to only $30 million in the third quarter. The update was a reminder of how slow and gradual the improvement in airlines' fortunes is likely to be, even if the U.S. economy can continue its reopening without fresh setbacks.
Likewise Hertz Global stock (NYSE:HTZ) fell nearly 10% after filing to issue up to $500 million in stock, even though it warned in the filing that the shares could be worthless. The car rental company is currently in Chapter 11 bankruptcy proceeedings, meaning that the proceeds of any stock sale are likely to go more or less directly to its creditors. According to Investing.com data, Hertz had over $18 billion in debt at the end of March and only $3 billion of cash and receivables.
Elsewhere, BP ADRs (NYSE:BP) fell 5.2% after the company said it expected to write down its assets by as much as $17.5 billion in the second quarter due to lower long-term expectations for oil prices. U.S. Crude futures, which had rallied strongly in anticipation of a rebalancing of the global oil market in recent weeks, fell 3.3% to $35.08 a barrel, while Brent crude fell 1.6% to $38.11.