Tuesday’s Stock Market Open: US Equities Fall As Traders Take Pause From Recent Rally

Update: 12:05 p.m. EDT:

U.S. stocks turned mixed in noon Tuesday trading.

The Dow Jones Industrial Average dropped 271.88 points to 27,300.56, while the S&P 500 fell 26.50 points to 3,197.35 and the Nasdaq Composite Index edged up 13.2 points to 9,937.95.

In Europe markets finished lower, as Britain’s FTSE-100 fell 2.11%, while France’s CAC-40 tumbled 1.55% and Germany’s DAX dropped 1.57%.

Original story:

U.S. stocks fell on Tuesday as investors consolidated gains from a sharp rally that sent the Nasdaq to record highs and erased the S&P 500’s loss for the year.

The Dow Jones Industrial Average dropped 353.42 points to 27,219.02, while the S&P 500 fell 35.04 points to 3,197.35 and the Nasdaq Composite Index tumbled 59.01 points to 9,865.74.

The World Bank warned the global economy will shrink by 5.2% this year, the most since World War II, putting millions of people into poverty.

The National Federation of Independent Business Small Business Optimism Index increased in May to 94.4, from April’s 90.9 reading.

“As states begin to reopen, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies,” said NFIB’s Chief Economist Bill Dunkelberg. “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.”

Analysts are generally cautious on the stock market.

“There are a lot of unknowns that we are dealing with despite the fact that normalizations of economic activities are still on track,” said Frank Tsui, a senior fund manager at Value Partners. “There are still a lot of unknown factors.”

“Equities continue to trend higher in anticipation of improving economic conditions,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “But I think it’s premature to declare happy days are here again. What gives us caution is the duration of Covid-19 remains unknown. We don’t have treatments, we don’t have prevention and we’re a little bit at the mercy of how fast the virus spreads.”

“Recent data points like the jobs report and not-as-bad-as-feared company updates have fueled the view that the worst of the declines could be behind us,” said RBC Capital Markets analysts. “The risk-on trade really is gaining traction. Valuations have spiked to historical highs in many industrial sub-sectors, signaling a strong recovery is potentially taking hold.”

Marc Chaikin, founder of Chaikin Analytics, a quantitative investment research firm based in Philadelphia, said of the market: “Traditional investors are now faced with the unenviable decision of whether to jump on a moving train or risk missing out on further advances in stock prices.”

Chaikin added that while the road to an economic recovery will be bumpy, “stocks are looking ahead 12-18 months and seeing a return to normalcy. Much depends on whether we experience a second wave of COVID-19 spread after the reopening of the economy, and the onset of cooler weather in the fall. And of course the development of a safe, effective vaccine is also an important assumption that is built into the market’s historic advance and move toward euphoria.”

Overnight in Asia, markets finished mixed. The Shanghai Composite climbed 0.62%; Hong Kong’s Hang Seng rose 1.13%; while Japan’s Nikkei-225 slipped 0.38%.

In Europe markets traded lower, as Britain’s FTSE-100 fell 1.78%, while France’s CAC-40 tumbled 1.58% and Germany’s DAX dropped 1.68%.

Crude oil futures dropped 0.6% at $37.96 per barrel, Brent crude fell 1.15% at $40.33. Gold futures gained 1.05%.

The euro edged up 0.14% at $1.1312 while the pound sterling slipped 0.39% at $1.2674.