Stocks slip, breaking Wall Street’s 4-day run

Stocks pulled back Monday on Wall Street as markets around the world paused following record-setting runs.

The S&P 500 fell 0.7 percent, breaking a four-day winning streak. Tesla, Amazon, Apple and other big gainers over the past year led the way lower, even as financial, health care and energy stocks notched gains. Treasury yields continued to rise.

Analysts said a pullback was no surprise following the big rally recently for everything from stocks to bond yields to commodities amid a wave of optimism. With Democrats set to take control of Washington, investors expect Congress to try soon to deliver more stimulus to the economy through larger cash payments for Americans and other programs. That’s building on top of enthusiasm already built about a powerful economic recovery coming later this year as COVID-19 vaccines roll out.

The market managed to look past much of last week’s bad news, including the attack on the U.S. Capitol on Wednesday, surging virus cases and a disappointing employment report, said Julian Emanuel, BTIG chief equity and derivatives strategist. That both speaks to the market’s resiliency and could signal a change in attitudes.

“The fact that the market shrugged all of this news off, it’s ushering in a more speculative stage in the bullmarket,” he said.

The S&P 500 dropped 25.07 points to 3,799.61. The Dow Jones Industrial Average fell 89.28 points, or 0.3 percent, to 31,008.69. The Nasdaq composite slid 165.54 points, or 1.3 percent, to 13,036.43. The three indexes set all-time highs on Friday.

The market’s record-setting run means stocks and other investments are even more expensive, leaving critics to say they’ve gone too high. One of the main ways professional investors gauge a stock’s value is by measuring its price against how much profit it made in the prior 12 months. Stocks in the S&P 500 are trading at roughly 29 times their earnings. That’s amuch more expensive price tag than their average over the last decade of a little below18, according to Fact Set.

“Given where we are in terms of valuation, there’s not going to be tolerance for news that isn’t good,” Emanuel said.

At the same time, the worsening pandemic continues to slam the economy. U.S. employers cut more jobs last month than they added, for example, the first month of job losses since last spring. New, potentially more contagious strains of the coronavirus are helping the pandemic to tighten its grip on the global economy.