US stocks move lower, oil prices retreat
Banks and industrial companies sag, tech stocks gain
NEW YORK, July 6, (AP): Stocks fell in midday trading Tuesday, with the S&P 500 down 0.8% after notching a string of record high closes.
Oil prices retreated after jumping overnight and bond prices rose, sending the yield on the 10-year Treasury to its lowest level since February.
The S&P 500 index was down 35 points as of 12:10 a.m. Eastern. The Dow Jones Industrial Average fell 370 points, or 1.1%, to 34,415 and the Nasdaq Composite was down 0.5%.
The broad slide was led by banks and industrial companies. Technology stocks were among the few gainers.
Oil prices pulled back after jumping overnight when talks among members of the OPEC cartel and allied oil producing countries broke off in the midst of a standoff with the United Arab Emirates over production levels. The U.S. benchmark crude oil price fell 2.5% to $73.32; it earlier rose to $76.98, the highest level since November 2014.
Falling oil prices dragged down energy companies. Exxon Mobil fell 2.8% and Chevron fell 2.1%.
With oil prices pushing toward $80 a barrel, that “raises the risk of a price war if the conflict escalates, like in March last year,” Harpreet Bhal of ActivTrades said in a commentary.
“Higher energy costs could fan inflationary stresses and add to the case for global central banks to temper emergency stimulus in the months ahead,” Bhal said.
Investors got another small snapshot of the economy, with a report showing growth in the services sector, where most Americans work, slowed in June following record expansion in May.
Longer-term Treasury yields sank as the report suggested this year’s surge in inflation may have already peaked and as nervousness rose in the market.
The 10-year Treasury yield dropped to 1.37% from 1.44% on Friday and is back to where it was in February. It had rallied powerfully earlier this year on worries that inflation was set to burst to dangerous levels as the economy roared back to life.
The report indicated prices that U.S. services businesses are paying rose at a slower rate last month. Exam gloves and masks got cheaper, for example, and the price index for the U.S. services industry decelerated to 79.5 in June after hitting a peak of 80.6 in May, according to the Institute for Supply Management. Any reading above 50 indicates growth.
More broadly, the services industry’s growth slowed last month, and by more than economists expected. That fits into Wall Street’s growing belief that growth for many areas of the economy is peaking or has done so already. It would also give more credence to the Federal Reserve’s insistence that inflation looks to be only a temporary problem.
The lower yields weighed on banks, which rely on higher yields to charge more lucrative interest on loans. Bank of America fell 2.6% and Citigroup fell 3.2%.
The market is currently in a summer lull, with investors having little go act on until next week, when corporate earnings season starts up again. U.S. markets have a holiday shortened week this week, since markets were closed on Monday.
Shares of ride-hailing company Didi Global dropped 21%. That follows a 5% drop Friday after China announced it would investigate the cybersecurity practices of three ride technology companies, including Didi. The government has also announced cybersecurity reviews of Full Truck Alliance, the operator of two truck logistics platforms and Kanzhun Ltd., operator of an online recruitment outfit. Full Truck dropped 17.3% and Kanzhun fell 15%.
France’s CAC 40 dropped 0.5% in early trading to 6,534.23, while Germany’s DAX lost 0.6% to 15,561.04. Britain’s FTSE 100 edged down 0.2% to 7,153.81.
Asian shares were mixed Tuesday as oil prices surged after a meeting of oil producing nations was postponed, and little else guided markets after the U.S. Independence Day holiday.
Benchmarks in Japan and South Korea rose, while those in China and Australia declined.
Investors have been trimming holdings of Chinese technology company shares as Beijing tightens oversight of the industry.
Japan’s benchmark Nikkei 225 edged up 0.2% to 28,666.38. South Korea’s Kospi added 0.3% to 3,302.59. Australia’s S&P/ASX 200 fell 0.7% to 7,264.00. Hong Kong’s Hang Seng lost 0.3% to 28,062.49, while the Shanghai Composite slipped 0.7% to 3,515.88.
In energy trading, U.S. benchmark crude rose $1.55 to $76.71 a barrel. Brent crude, the international standard, added 31 cents to $77.47 per barrel.
In Asia, the pandemic remains a major risk that could hinder the recovery in some countries with fresh outbreaks of COVID-19, said Yeap Jun Rong, a market strategist at IG in Singapore.
“This comes as the vaccination rate in Asia has been largely trailing behind other regions, leading to lockdowns being the go-to option to contain virus spreads,” Yeap said in a report.
Worries about health risks are growing ahead of the Tokyo Olympics, which begin later this month with 11,000 Olympic athletes and 4,400 Paralympians entering Japan from more than 200 countries. Tens of thousands of judges, sponsors, dignitaries and media also are attending.
The government is determined to go ahead with the games, despite warnings from medical experts, promising border controls and curbs on spectators to keep the events safe.
While the public remains skeptical, with a majority of people opposed to holding the Games this year, any protests have been muted in this country known for its public order and decorum.