Investor Alert

Oct. 26, 2020, 3:14 p.m. EDT

Airline stocks suffer broad selloff as travel demand dips, COVID-19 cases surge

Tomi Kilgore

Shares of airline operators were broadly and in some cases sharply lower Monday, as the number of weekly travels fell for the first time since the post-Labor Day bump, amid growing concerns over the potential fallout from the surge in new COVID-19 cases .

The number of people going through Transportation Security Administration checkpoints fell to a daily average of 844,217 for the week ended Sunday, from a daily average of 871,513 the week before, according to a MarketWatch analysis of TSA throughput data . That’s the first decline since the week ended Sept. 20. The daily average had declined back then after it got a boost the week before from increased travel on Labor Day .

The dip in travelers comes as the daily tally of new COVID-19 cases in the U.S. rose to records over the weekend, and a number of European countries moved to tighten restrictions as the continent was hit with a spike in cases.

Don’t miss : Coronavirus update: U.S. death toll tops 225,000 and Trump’s chief of staff says U.S. is ‘not going to control the pandemic.’

The U.S. Global Jets exchange-traded fund (PSE:JETS) dropped 5.3% in afternoon trading, while the Dow Jones Transportation Average (DJX:DJT) slumped 2.6% with all six airlines components losing ground.

The airline sectors losses underperformed the broader stock market by a wide margin, as the Dow Jones Industrial Average (DOW:DJIA) dropped 735 points, or 26% and the S&P 500 index (S&P:SPX) lost 2.1%.

Among the more-active airline stocks, American Airlines Group Inc. (NAS:AAL) sank 6.0%, United Airlines Holdings Inc. shed 7.6% (NAS:UAL) , Delta Air Lines Inc. dropped 6.3% (NYS:DAL) , JetBlue Airways Corp. (NAS:JBLU) slid 7.0% and Southwest Airlines Co. (NYS:LUV) gave up 4.7%.

Elsewhere, shares of Alaska Air Group Inc. (NYS:ALK) dropped 7.8% to pace the Dow transports’ airline decliners, Spirit Airlines Inc. (NYS:SAVE) fell 8.3%, Hawaiian Airlines parent Hawaiian Holdings Inc. (NAS:HA) declined 5.4% and Mesa Air Group Inc. (NAS:MESA) was down 5.7%.

Also weighing on airline stocks is uncertainties over a government stimulus, which has been a key driver of the airline sector in recent months.

“U.S. stimulus is not a slam dunk,” wrote Raymond James airline analyst Savanthi Syth in a note to clients. “While negotiators are striking a more optimistic tone, our Washington policy analysts continue to see the post-election period as the earliest chance of finalizing a deal, with risks remaining in this scenario tied to the election outcome.”

See related : ‘It’s about midnight’ for stimulus deal, key GOP senator says .

On the bright side, the daily average of travelers for the weeks ended Sundays reached a post-COVID high of 871,513 for the week ended Oct. 18, which is nearly nine times the post-COVID low of 97,799 for the week ended April 19.

The Jets ETF has now shed 43.9% year to date, but has run up 48% since closing at a post-COVID-19 low of $12.00 on May 15.

Link to MarketWatch's Slice.