Wall Street dips to give back some of last week's big gains
Stocks are dipping in early trading on Wall Street Monday and giving back some of the strong gains made last week.
The S&P 500 slipped 0.6% in the first few minutes of trading, following drops in Europe and a mixed performance in Asia.
While relatively modest, the declines were widespread, and four stocks fell for every one that rose in the S&P 500.
The losses ate into a recent rally for stocks, which have completely shrugged off the economic devastation currently sweeping the world to leap roughly 30% since late March. Some investors are looking ahead to the possibility of a strong economic recovery later this year, after governments reopen economies and lift business-shutdown orders meant to slow the spread of the coronavirus.
That ultra-optimistic view took some hits Monday, though, as worries rose about the possibility of new waves of infections hitting countries that have already begun to lift lockdown measures.
In South Korea, for example, one nightclub customer has been linked to dozens of new infections. That pushed authorities to reimpose restrictions on nightclubs and bars, as well as delay the reopening of schools by a week. Investors also pointed to small but disconcerting increases of infections in China and in Germany.
“While the argument that forward-looking market hopes of recovery should override backward looking economic gloom may not be groundless, it inevitably understates inherent fragilities and risks,” Riki Ogawa of Mizuho Bank said in a report.
The Dow Jones Industrial Average fell 203 points, or 0.8%, to 24,127, as of 9:45 a.m. Eastern time. The Nasdaq slipped 0.2%.
Stocks whose profits tend to track most closely with the strength of the economy had the biggest drops, underscoring the worries about a resurgence in infections.
Raw-material producers in the S&P 500 fell 2% for the biggest loss among the 11 sectors that make up the index. A weaker global economy wouldn’t need as many basic building blocks.
Financial stocks were also weaker than the rest of the market. They’ve been hit hard this year on worries that the recession will lead to a wave of households and businesses defaulting on their loans.
Smaller stocks also took steeper losses. They had been rising faster than their big rivals in recent weeks, but they usually fall more than the rest of the market when the economy is expected to struggle, in part because of their more limited financial resources. The Russell 2000 index of small-cap stocks was down 1.1%.
The data streaming in on the economy remain oppressively bad. After a report on Friday showed U.S. employers cut a record-setting 20.5 million jobs in April, Italy reported Monday its largest-ever drop in industrial production. More data reports this week include U.S. unemployment claims and retail sales and Australian jobs.
Companies remain uncertain about the future, with many opting to give no financial forecasts during their latest quarterly earnings reports. On Sunday, one of Latin America’s largest airlines, Chile’s Avianca, asked a New York City bankruptcy court for protection from creditors while the carrier reorganizes amid a travel slump it said has cut revenue 80%.
Earlier, Asian markets were supported somewhat by the Chinese central bank’s promise to use “more powerful” policies to support economic recovery and job creation.
Japan’s Nikkei 225 rose 1%, while stocks in Shanghai were close to flat. South Korean stocks fell 0.5%.
In Europe, the French CAC 40 fell 1.6%, and Germany’s DAX lost 1.2%. The FTSE 100 in London slipped 0.4%. In Asia,
Investors hoping for reassurance were looking ahead to an appearance by U.S. Federal Reserve chairman Jerome Powell on Wednesday.
“He is certainly not going to walk back any of the Fed extraordinary stimulus measures,” said Stephen Inness of AxiTrader in a report. “If anything, he could lay it down even thicker.”
The yield on the 10-year Treasury slipped to 0.67% from 0.68% late Friday.
Benchmark U.S. crude rose 1% to $24.98 per barrel. Brent crude, the international standard, slipped 0.2%, to $30.92 per barrel.
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