Wall Street hits the brakes after strong, weekslong rally
Wall Street hit the brakes Tuesday, a day after its remarkable, weekslong rally brought the S&P 500 back to positive for the year and the Nasdaq to a record high.
The benchmark index fell 0.8%, its largest loss in almost three weeks, as traders cashed in on some of the market’s recent gains. Financial, industrial and health care stocks led the slide. Technology companies were among the gainers, helping to push the Nasdaq to another alltime high.
Skeptics have been saying for weeks that Wall Street’s huge rally, which reached 44.5% between late March and Monday, may have been overdone. The economy has given glimmers of hope that the recession could end relatively quickly as governments lift their lockdown orders, but the strength and speed of the stock market’s rebound has easily outpaced expectations for a recovery in the broader economy and corporate profits.
“Today is actually a pretty mild digestion of recent gains, and I think it’s long overdue,” said Sam Stovall, chief investment strategist at CFRA.
The S&P 500 lost 25.21 points to 3,207.18. The index is now back in the red for the year and remains 5.3% below its alltime high set in February. The Dow Jones Industrial Average dropped 300.14 points, or 1.1%, to 27,272.30. The Nasdaq composite rose 29.01 points, or 0.3%, to 9,953.75.
In another sign of increased caution, the yield on the 10-year Treasury yield fell to 0.83% from 0.88% late Monday. It tends to move with investors’ expectations of the economy and inflation, though it’s still well above the 0.64% level where it started last week.
Wall Street has been generally rising since late
March, at first on relief following emergency rescues by the Federal Reserve and Congress. More recently, investors have begun piling into companies that would benefit most from a reopening economy that’s growing again.
Banks, airlines, energy companies and others that rely heavily on economic growth have been leading the way in recent weeks. They got a big boost on Friday when the government said that employers added jobs to their payrolls last month, even though economists expected millions to be cut. Investors took it as a sign that the economy could pull out of the recession that began in February relatively quickly.
Those companies went into reverse on Tuesday. American Airlines and Alaska Air Group both fell more than 8% a day after they were near the top of the leaderboard. Marathon Oil skidded 9.1%.