(Reuters) -Wall Streetâ€™s main indexes fell nearly 2% on the first trading day of the year on Monday as nerves over the outcome of runoff elections in Georgia this week countered optimism over a vaccine-driven recovery in the global economy.
The Dow was also dragged down by a near 4.3% fall in Boeing Coâ€™s shares after Bernstein cut its rating to â€œunderperformâ€, saying issues with MAX 787 could significantly hurt the U.S. planemakerâ€™s free cash flow.
The fate of President-elect Joe Bidenâ€™s agenda including rewriting the tax code, boosting stimulus and infrastructure spending hinges firmly on Tuesdayâ€™s twin Senate races in the battleground state that will determine control of the chamber.
â€œThe market is going to be hard pressed to go up much until the Georgia election is decided,â€ said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
â€œSenate race in Georgia is now a toss up,â€ Meckler said, adding that it â€œis the much bigger risk as investors have already decided that COVID will be mostly behind us later in the year.â€
Before dipping in the red, the S&P 500 and the Dow notched record levels within the first few minutes of trading, attempting to extend a rally from 2020 fueled by monetary stimulus and the start of vaccine rollouts.
Wall Streetâ€™s fear gauge touched a two-week high on Monday.
All major S&P sectors dropped with real estate, utilities and industrials posting the sharpest percentage declines. Consumer discretionary and materials hit all-time highs in early trading.
At 11:54 a.m. ET the Dow Jones Industrial Average fell 562.60 points, or 1.84%, to 30,043.88, the S&P 500 lost 62.89 points, or 1.67%, to 3,693.18, and the Nasdaq Composite lost 187.31 points, or 1.45%, to 12,700.71.
U.S. manufacturing activity picked up at its briskest pace in more than six years in December, a survey showed on Monday. It comes on the heels of upbeat factory activity surveys across Europe and Asia earlier in the day.
Some investors are cautious about the pace of economic growth as U.S. jobless claims remain stubbornly high, while a new round of pandemic-related restrictions last month and the discovery of a new variant of the coronavirus have cast a shadow on the outlook.
Tesla Incâ€™s shares extended a meteoric rally to scale a record high after the electric-car maker reported better-than-expected vehicle deliveries in 2020.
Shares of FLIR Systems Inc jumped about 19% after Teledyne Technologies Inc agreed to buy the thermal imaging camera supplier for $8 billion in cash and stock. Teledyneâ€™s shares dropped about 9%.
Declining issues outnumbered advancers for a 2.2-to-1 ratio on the NYSE and a 1.6-to-1 ratio on the Nasdaq.
The S&P 500 posted 54 new 52-week highs and no new low, while the Nasdaq recorded 284 new highs and 14 new lows.
Reporting by Medha Singh and Shivani Kumaresan in Bengaluru; Editing by Anil Dâ€™Silva and Shounak Dasgupta