Traders on the floor of the New York Stock Exchange
Shares fell on Tuesday as Wall Street began the shortened vacation week on concerns that perhaps the best economic recovery from the pandemic was behind us.
The Dow Jones Industrial Average fell 400 points, dragged down by losses at JPMorgan, Chevron and Goldman Sachs. The S&P 500 lost 0.7% and the Nasdaq Composite traded the flat line after both averages hit records at the opening. US markets were closed on Monday for Independence Day on July 4th. The S&P 500 has had a seven-day winning streak, the longest since August.
Investors are juggling multiple signs that rapid economic growth may peak from the depths of the pandemic. The ISM Services Index, a key benchmark for the services sector, slowed from a record high in the previous month to 60.1 in June, data released Tuesday showed. Economists polled by Dow Jones expected a pressure of 63.5. This follows Friday’s job report, which showed that the unemployment rate rose back to 5.9% from 5.6%, compared to expectations.
Bond yields also fell Monday, with 10-year government bond yields below 1.4%, further evidence that investors are questioning the strength of the US economy.
While business stocks like Caterpillar and JPMorgan fell, tech stocks rose. Amazon, Apple and Microsoft were higher.
Amazon surged nearly 3% and became technology leaders when Andy Jassy officially took over as CEO on Monday. Jeff Bezos is now Executive Chairman of the Board.
Still, after a strong first half performance amid a historic economic reopening, many on Wall Street expect smaller and more troubled gains for the remainder of the year. The S&P 500 is up nearly 16% since the start of the year.
“The US economy is booming, but we know it by now and the asset markets reflect it. Which is no longer so clear what price this growth will come at, “said Michael Wilson, chief strategist for US equities at Morgan Stanley, in a note. “Higher costs mean lower profits, another reason the stock market has narrowed overall … Stock markets will likely pause this summer as things heat up.”
Wall Street’s consensus year-end target for the S&P 500 is 4,276, a loss of nearly 2% from current levels of 500 stocks, according to the CNBC Market Strategist Survey, which rounds up the forecasts of 16 top strategists.
“Everything is perfect and that worries me,” said Sarat Sethi, portfolio manager at DCLA, in CNBC’s “Squawk Box” on Tuesday. “We’ve had a 5% correction since October, that’s it. I think we’re in a little bit of euphoria in the short term. We have to be careful and I think you want to be in secular growth.” Companies, don’t just chase the market because I think the market will be very picky about which sectors will do well. “
U.S. shares in Chinese ride-hailing giant Didi plummeted as much as 25% after China said new users would not be able to download the app until a cybersecurity clearance was conducted. The announcement surprised the markets as Didi only made his US debut on the NYSE last week.
West Texas Intermediate crude oil rose to a six-year high after an important meeting between the oil producing group OPEC and its partners on crude oil exploration policy was canceled. The postponement came when the United Arab Emirates rejected a proposal to extend oil production increases for a second day. At some point on Tuesday, WTI crude oil hit as high as $ 76.98, the highest price since November 2014 after pulling back before the opening bell.
Investors await the release of the June Federal Open Markets Committee’s minutes of the June meeting for clues to the central bank’s behind-the-scenes discussions on the abolition of its quantitative easing program.