Wall Street takes a breather as stocks fall after 4-day run

Stocks closed lower on Wall Street Monday as trading cooled in markets around the world following record-setting runs.

The S&P 500 fell 0.7%, breaking a four-day winning streak.

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. At the same time, the worsening pandemic continues to slam the economy.

Treasury yields continued to rise, partly on expectations that the U.S. government is set to borrow a lot more money for stimulus programs. That has investors raising their expectations for economic growth and inflation.

The market managed to essentially shrug off 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 bull market,” he said.

The big rally 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 a much more expensive price tag than their average over the last decade of a little below 18, according to FactSet.

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 economy around the world.