Stocks edge lower as caution pervades Wall Street

U.S. stock indexes erased much of their early losses and closed modestly lower Thursday, extending the S&P 500’s losing streak to a third day.

Technology, health care and communications stocks accounted for most of the selling, outweighing slight gains in banks and elsewhere in the market.

The S&P 500 fell 5.33 points, or 0.15%, to 3,483.34. The Dow Jones Industrial Average dropped 19.80 points, or 0.1%, to 28,494.20. It had been down 332 points in the early going. The Nasdaq composite gave up 54.86 points, or 0.5%, to 11,713.87.

Stocks in smaller companies fared better than the broader market. The Russell 2000 index of small-cap stocks bounced back from an early slide and rose 17.23 points, or 1.1%, to 1,638.88.

Wall Street has turned cautious this week amid a confluence of worrisome trends for the economy, which is still hampered by the pandemic. Coronavirus infections are rising in Europe, prompting governments in France and Britain to impose new measures to contain the outbreak. European stock indexes fell broadly Thursday as traders pulled money out of riskier investments.

In the U.S., investor optimism that the Trump administration and Congress will soon reach a deal on another round of stimulus for the economy has waned. And the government said Thursday that the number of Americans seeking unemployment aid increased more than expected last week.

“The stimulus talk continues to be a little negative, and the virus outbreak in Europe that’s going to probably cause more shutdowns in various cities and countries, that’s a little bit of a negative, too,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

Still, Wren added, the market is expecting Washington will deliver another round of stimulus at some point, and continues to expect that various efforts to develop covid-19 treatments and vaccines will pan out. If that wasn’t the case, the recent pullback in stocks would be much more severe, he said.

“The market is still pretty convinced we’re going to see good news on both fronts, it’s just not sure when,” Wren said.

Stocks have been mostly climbing this month, but have pulled back this week as ongoing talks between Democrats and Republicans on an economic stimulus package have failed to deliver results. Investors have been hoping that Washington would provide more financial support for the economy since the end of July, when a $600-a-week extra benefit for the unemployed expired.

The government’s latest weekly tally of unemployment claims underscores how the economy continues to be hobbled by the pandemic and recession that emerged seven months ago. The Labor Department said Thursday that the number of Americans seeking unemployment benefits rose last week to 898,000, a historically high number that exceeds analysts forecasts.

The report follows recent data that has signaled a slowdown in hiring. The economy is still roughly 10.7 million jobs short of recovering all the 22 million jobs that were lost when the pandemic struck in early spring.

The 10-year Treasury yield held steady at 0.73%.

Investors continued to weigh the latest batch of earnings reports from major U.S. companies. Several reports so far have been better than expected, but the health crisis continues to cloud the outlook.

United Airlines slumped 3.8% Thursday after reporting that its revenue plummeted over the summer. Morgan Stanley rose 1.3% after the investment bank said its third quarter profit jumped 25%, thanks to a surge in trading revenue and higher fees. Walgreens Boots Alliance gained 4.8% after the drugstore chain’s latest quarterly results topped Wall Street’s forecasts.

Across the S&P 500, analysts are expecting companies to report another drop in profits for the summer from year-ago levels. But they’re forecasting the decline to moderate from the nearly 32% plunge from the spring as the economy has shown signs of improvement.