Stocks fall as trading starts for year of great expectations
U.S. stocks pulled back from their recent record highs Monday, as big swings returned to Wall Street at the start of a year in which the dominant expectation is for a powerful economic rebound to sweep the world.
The Standard & Poor’s 500 index, which ended 2020 at an all-time high, slid 1.5% after earlier dropping as much as 2.5%. It was the benchmark index’s biggest decline since late October. Technology companies accounted for a big share of the sell-off, along with industrial, communication services, healthcare and other stocks. Only the S&P 500’s energy sector managed to eke out a gain.
The selling comes as COVID-19 cases keep climbing at frightening rates around the world, threatening to bring more lockdown orders that would punish the economy. The worsening numbers also raise the possibility that Wall Street has been overly optimistic about the big economic recovery it sees coming because of COVID-19 vaccines. Tuesday’s upcoming runoff elections to determine which party controls the Senate may also be contributing to the volatility.
The S&P 500 fell 55.42 points to 3,700.65. The Dow Jones industrial average also fell from its record set last week, shedding 382.59 points, or 1.3%, to 30,223.89. At one point, it was down 724 points. The tech-heavy Nasdaq composite lost 189.84 points, or 1.5%, to 12,698.45.
Small-company stocks, which have been notching solid gains in recent weeks, also fell. The Russell 2000 index of smaller companies dropped 28.94 points, or 1.5%, to 1,945.91.
Treasury yields held relatively steady after giving up a healthy gain in the morning. Gold jumped 2.7%, while the price of U.S. crude oil fell 1.9%.
California’s economic recovery slowed in November as lots of workers dropped out of the labor force. Unemployment, which counts those still seeking work, fell to 8.2%.
Stocks also fell in Japan as officials there mull over a state of emergency due to surging COVID-19 cases. But optimism was more prevalent in other markets, with European and most Asian indexes closing higher.
In the United States, regulators have already approved two vaccines. China last week gave the greenlight for its first domestically developed vaccine. Others are also being tested.
Even though infection rates and hospitalizations are at frightening levels, many investors have been betting that ultralow interest rates provided by the Federal Reserve and financial support for the economy recently approved by Congress can help tide the economy over until vaccinations become more widespread.
Almost 9 out of 10 stocks in the S&P 500 fell Monday. On the losing end of the market were several Big Tech stocks. Apple fell 2.5%, Microsoft dropped 2.1% and Amazon lost 2.2%. Because they’re so massive, the Big Tech stocks have much more sway over the S&P 500 than other companies’ shares. Those three were the biggest drags on the index.
Stocks of airlines, cruise operators, hotel chains and other companies hit particularly hard by the pandemic also had some of the market’s sharpest losses. Alaska Air Group slid 5.3%, while Norwegian Cruise Line fell 6.7%.
Tesla rose 3.4% after it said it delivered 499,500 vehicles last year. That’s a 36% jump for the year, though it fell short of CEO Elon Musk’s goal of 500,000, which was set before the pandemic hit.
In European stock markets, France’s CAC 40 gained 0.7%, and Germany’s DAX returned 0.1%. The FTSE 100 in London rose 1.7%.
In Asia, Tokyo’s Nikkei 225 lost 0.7% after Prime Minister Yoshihide Suga said a state of emergency was under consideration for the Japanese capital and three surrounding prefectures because of surging coronavirus caseloads.
Suga called on restaurants and bars to close by 8 p.m. and said it would be difficult to restart a travel promotion program that was suspended last month. He said the government would expedite approval of COVID-19 vaccines and begin providing injections in February.
South Korea’s Kospi rose 2.5%, Hong Kong’s Hang Seng gained 0.9% and stocks in Shanghai climbed 0.9%.
In the bond market, the yield on the 10-year Treasury rose to 0.91% from 0.89% late Thursday. In the morning, it had climbed as high as 0.96% in a signal of rising expectations of economic growth and inflation. Markets were closed Friday for New Year’s Day.
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