New Zealand shares fell as stock markets across Asia followed Wall Street's lead as investor optimism over the pace of the recovery was brought to a halt by pessimistic economic outlooks and a growing number of new Covid-19 cases in some US states.
The S&P/NZX 50 Index dropped 248.99 points, or 2.2 per cent, to 10,905.94. Within the index, 47 stocks fell, one rose, and two were unchanged. Turnover was $202.9 million.
The stare-down between resurgent stock markets and waning economies broke overnight. Wall Street investors were the first to blink after the US Federal Reserve gave dire economic forecasts and as new cases of Covid-19 increased in three US states.
The major US benchmark indices dropped more than 5 per cent overnight and Asian markets followed. The NZX 50 fell 4.5 per cent when local trading opened, but recovered throughout the day. Australia's ASX 200 Index followed a similar trend and was down 1.5 per cent at 5pm in Wellington.
"Markets have effectively released some steam after pretty exuberant times," said Brad Gordon, an investment adviser at Hobson Wealth.
Gordon said the recent negative headlines were no worse than investors had been seeing since March, with the market reaching an inflexion point rather than investors reacting to bad news.
Markets had been on an upwards tear from March lows. This week, the S&P 500 had rallied 44 per cent from the trough, the Nasdaq Composite hit an all-time high and the NZX 50 had advanced more than 30 per cent.
Now those gains were being cashed in as investors feel the market had reached a tipping point.
Gordon said the correction was unlikely to last as some investors who had been sitting on the sidelines were buying the recent weakness. US futures were up in local trading, suggesting Wall Street would bounce back tonight.
Sky Network Television led the local market, falling 11.1 per cent to 16 cents. The pay-TV operator completed the retail component of a $157m capital raising at 12 cents a piece.
After trading closed, S&P announced changes to the NZX 50, with Gentrack leaving the benchmark index and Napier Port joining it. Gentrack fell 4.2 per cent to $1.60, while Napier Port declined a more modest 0.3 per cent to $3.53.
Retail and travel stocks, which had been driving the wave of recovery in recent weeks, bore the brunt of today's decline.
Vista Group International fell 7.8 per cent to $1.66, Kathmandu Holdings declined 6.7 per cent to $1.11, SkyCity Entertainment Group fell 5.5 per cent to $2.75.
Air New Zealand fell 2.4 per cent to $1.62, Gordon said the airline's swiftly rising share price over recent weeks had "defied all common sense."
Auckland International Airport dropped 4 per cent to $6.48 and Tourism Holdings decreased 1.3 per cent to $2.31.
Refining NZ fell 4.5 per cent to 85 cents and Z Energy declined 3 per cent to $2.95. Both stocks have been hit by dramatically reduced demand for fuel due to pandemic lockdowns and ensuing slowed activity.
Westpac Banking Corp dropped 4.1 per cent to $18.98, Australia & New Zealand Banking Group declined 3.5 per cent to $20.19 and Heartland Group fell 3.7 per cent to $1.31.
Ryman Healthcare fell 1.5 per cent to $12.85, having fallen 21.3 per cent year to date. The country's biggest listed retirement village operator reported a 6.6 per cent rise in underlying annual profit today.
Precinct Properties New Zealand fell 2.1 per cent to $1.625. It paid a third-quarter dividend of 1.575 cents today and said it's confident of meeting full-year dividend guidance of 6.3 cents.
Trustpower was the solitary gainer on the day, up 0.6 per cent at $7.07. Vector was unchanged at $3.65 and Skellerup Holdings closed unchanged at $2.05.