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Most stocks slink back after strong rally, except for tech Wall Street follows solid stock market rally with pullback
(about 4 hours later)
NEW YORK — Most of Wall Street is slipping in midday trading on Tuesday, giving back some of the big gains made the past couple weeks, but a handful of tech giants bucked the trend and kept the market’s losses in check. Banks and companies that rely on consumer spending led stocks broadly lower on Wall Street Tuesday, as the market gave back some of the big gains it made the past couple of weeks. The S&P 500 fell 1.1%, snapping a five-day winning streak. Stocks sank more across the Atlantic after the European Union said this year’s recession will be deeper than earlier forecast. Gold and silver prices rose, and the 10-year Treasury yield fell.
Seven out of 10 stocks in the S&P 500 were dropping, and the index was 0.1% lower, as of noon Eastern time. Stocks sank more in France, Germany and elsewhere after the European Union’s executive arm said this year’s recession caused by the coronavirus pandemic will be deeper than forecast. It also said next year’s expected rebound could be weaker than expected. THIS IS A BREAKING NEWS UPDATE. AP’s earlier story is below.
The Dow Jones Industrial Average was down 173 points, or 0.7%, at 26,114, and stocks in Asia also fell following the big rally that swept markets worldwide on Monday. Banks and companies that rely on consumer spending led stocks broadly lower on Wall Street Tuesday, as the market gave back some of the big gains it made the past couple of weeks.
Big technology stocks were an outlier, though, with Microsoft, Apple and other titans pushing higher. Because of their huge size, they have more sway over broad market indexes than other stocks, and together they helped the S&P 500 erase its earlier loss of 0.6% from the morning. By midday, it was flipping between small gains and losses. The S&P 500 was down 0.6% after spending most of the day in the red. The selling put the benchmark index on pace to snap a five-day winning streak. The market’s slide followed a deeper sell-off in France, Germany and elsewhere after the European Union’s executive arm said this year’s recession caused by the coronavirus pandemic will be deeper than forecast. It also said next year’s expected rebound could be weaker than expected.
They also helped lift the Nasdaq composite by 0.6%, extending its record set a day earlier. The Dow Jones Industrial Average was down 295 points, or 1.1%, at 25,991. Big technology stocks helped drive early gains for the Nasdaq, but they faded by afternoon, knocking the index 0.3% lower. Small company stocks were down more than the rest of the market. The Russell 2000 index was off 1.4%.
The U.S. stock market has been churning over the last month, with big daily moves up and down keeping it roughly in place. It’s been a small-scale version of the market’s movements since the start of the year, when a nearly 34% plunge on worries about the pandemic-caused recession quickly gave way to a tremendous rally that brought the S&P 500 nearly back to its record level.The U.S. stock market has been churning over the last month, with big daily moves up and down keeping it roughly in place. It’s been a small-scale version of the market’s movements since the start of the year, when a nearly 34% plunge on worries about the pandemic-caused recession quickly gave way to a tremendous rally that brought the S&P 500 nearly back to its record level.
Pulling markets higher on one end are reports showing budding improvements in the economy. The job market, retail sales and other economic indicators are all still well below where they were before the pandemic struck. But they’ve stopped plummeting and have begun to grow again as governments relax restrictions meant to slow the spread of the coronavirus. Lifting markets higher on one end are reports showing budding improvements in the economy. The job market, retail sales and other economic indicators are all still well below where they were before the pandemic struck. But they’ve stopped plummeting and have begun to grow again as governments relax restrictions meant to slow the spread of the coronavirus.
That’s combined with unprecedented amounts of aid from central banks and governments around the world to prop up markets. It also helped send the S&P 500 up 1.6% on Monday, following up on a 4% rise the prior week, which itself helped cap the best decade for the index since 1998.That’s combined with unprecedented amounts of aid from central banks and governments around the world to prop up markets. It also helped send the S&P 500 up 1.6% on Monday, following up on a 4% rise the prior week, which itself helped cap the best decade for the index since 1998.
“The economic data that has come out over the past couple of months has actually beaten even the most optimistic economists, so in that scenario it’s not surprising to see a euphoria-driven rally in the market,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.
But pulling markets lower on the other end are worries that the optimism is overdone. The pandemic isn’t going away, with infection levels worsening across wide swaths of the U.S. South and West, among other global hotspots. The concern is that could keep households and businesses nervous and scare them away from spending. In the worst-case scenario, it could force governments to bring back some of the restrictions that sent the economy into its sudden recession.But pulling markets lower on the other end are worries that the optimism is overdone. The pandemic isn’t going away, with infection levels worsening across wide swaths of the U.S. South and West, among other global hotspots. The concern is that could keep households and businesses nervous and scare them away from spending. In the worst-case scenario, it could force governments to bring back some of the restrictions that sent the economy into its sudden recession.
Such worries spilled through markets Tuesday after the European Commission unveiled its more dour economic forecasts for 2020 and 2021.Such worries spilled through markets Tuesday after the European Commission unveiled its more dour economic forecasts for 2020 and 2021.
“The road to recovery is still paved with uncertainty,” EU Economy Commissioner Paolo Gentiloni told reporters in Brussels. “This is mostly linked to the epidemiological uncertainty.”“The road to recovery is still paved with uncertainty,” EU Economy Commissioner Paolo Gentiloni told reporters in Brussels. “This is mostly linked to the epidemiological uncertainty.”
The commission said the joint economy of the 27 nations in the European Union will shrink 8.3% this year, before growing 5.8% in 2021. In the previous forecasts released in May, it had forecast the economy would contract about 7.5% this year and bounce back 6% next year.The commission said the joint economy of the 27 nations in the European Union will shrink 8.3% this year, before growing 5.8% in 2021. In the previous forecasts released in May, it had forecast the economy would contract about 7.5% this year and bounce back 6% next year.
Underscoring the fragility, a separate report showed that industrial production in Germany rebounded by less than economists expected in May, and remains far below levels from before the pandemic caused factories to close.Underscoring the fragility, a separate report showed that industrial production in Germany rebounded by less than economists expected in May, and remains far below levels from before the pandemic caused factories to close.
Germany’s DAX lost 0.9%, while France’s CAC 40 fell 0.7%. The FTSE 100 in London dropped 1.5%. Germany’s DAX lost 0.9%, while France’s CAC 40 fell 0.7%. The FTSE 100 in London dropped 1.5%. Markets in Asia also fell.
In Asia, Japan’s Nikei 225 fell 0.4%, the Kospi in South Korea dropped 1.1% and the Hang Seng in Hong Kong slipped 1.4%.
In the U.S. market, airlines and stocks of other companies that most need the economy to get closer to normal had the sharpest losses.In the U.S. market, airlines and stocks of other companies that most need the economy to get closer to normal had the sharpest losses.
United Airlines lost 5.8%, American Airlines slipped 5.6% and mall-owner Simon Property Group dropped 4.2%. United Airlines slid 7.9%, American Airlines dropped 6.3% and mall-owner Simon Property Group dropped 4.2%.
Energy stocks fell 1.5% for the largest loss among the 11 sectors that make up the S&P 500. They’ve swung sharply with expectations for the economy’s health and demand for oil and gasoline. Devon Energy lost 4.7%, Valero Energy lost 4.2%. Energy stocks fell 2.5% for the largest loss among the 11 sectors that make up the S&P 500. They’ve swung sharply with expectations for the economy’s health and demand for oil and gasoline. Devon Energy lost 6.9%, while Valero Energy fell 5.8%.
Benchmark U.S. crude was up 0.8% at $40.94 per barrel after earlier flipping between losses and gains. Brent crude, the international standard, rose 0.5% to $43.33 per barrel. Benchmark U.S. crude slipped a penny to settle at $40.62 per barrel after earlier flipping between losses and gains. Brent crude, the international standard, fell 2 cents to close at $43.08 per barrel.
On the winning end were the big tech-oriented companies that have been dominating the market for years. Investors have continued to pile into companies they believe are able to grow almost regardless of the economy and whether people are locked in quarantines. Microsoft rose 1.1%, Apple gained 0.8% and Google’s parent company Alphabet added 1.1%. The yield on the 10-year Treasury slipped to 0.64% from 0.68% late Monday. It tends to move with investors’ expectations for the economy and inflation.
The yield on the 10-year Treasury slipped to 0.66% from 0.68% late Monday. It tends to move with investors’ expectations for the economy and inflation.
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AP Writers Yuri Kageyama and Samuel Petrequin contributed.AP Writers Yuri Kageyama and Samuel Petrequin contributed.
Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.