Stocks traded lower Monday, with analysts tying weakness in part to jitters over a pickup in COVID-19 infections in some parts of the world and the U.S., after equities ended last week with back-to-back gains.
What are major indexes doing?
The Dow Jones Industrial Average US:DJIA fell 226 points, or 0.9%, to 24,105. The S&P 500 US:SPX slipped 20 points, or 0.7%, to 2,910. The Nasdaq Composite US:COMP fell 28 points, or 0.3%, to 9,094.
Stocks posted back-to-back gains Thursday and Friday that left the Dow up 2.6% for the week at 24,331.32, while the S&P 500 saw weekly rise of 3.5% to 2,929.80. The Nasdaq Composite jumped 6% last week to 9,121.32.
Equities have bounced back strongly after the S&P 500 dropped by roughly a third from a February record high through March 23. Friday’s close left the Dow 17.7% below its all-time finish, while the S&P 500 is 13.5% below its record close and the Nasdaq is 7% away from its record finish.
What’s driving the market?
Analysts said some near-term consolidation may be in order after equities ended last week on a strong note. Investors appeared to shrug off Friday’s April U.S. jobs report, which saw the economy shed more than 20 million jobs and the unemployment rate surge to 14.7%.
A slowdown in the rate of COVID-19 infections and efforts toward reopening parts of the U.S. economy have fueled expectations the economy will see a V-shaped rebound, though analysts cautioned that a rise in infections in some parts of the country cast doubt on that scenario.
Bulls also point to a ramp up in federal spending aimed at cushioning the economy. Even more so, investors have argued that efforts by the Federal Reserve to backstop lending and ensure market functioning have fueled the rebound.
Treasury Secretary Steven Mnuchin said it may take a couple of weeks before new spending bills were announced.
Still, skeptics contend the reaction so far is pricing in a best-case scenario.
“How long risk assets supported by unconventional policies can defy the real economy remains an open question for now. But from where valuations are standing, it seems a lot of the good news is already priced in, and in my opinion, the best-case scenario is to see some sort of consolidation around current levels,” said Hussein Sayed, chief market strategist at FXTM, in a note.
“Until confidence returns to the real economy, the rally in risk assets will not be sustainable and investors will need to reconsider their positions at some point soon,” he said.
Earnings season, meanwhile, moves into its final stretch; 85% of S&P 500 companies had reported first-quarter results through Friday. The pandemic has taken a toll, with aggregate earnings on track to fall about 13.6% from a year ago, the worst performance since the third quarter of 2009, according to John Butters, FactSet’s senior earnings analyst. That is compared with expectations for 4.5% growth at the start of the first quarter.
What companies are in focus?
- Shares of Tesla Inc. US:TSLA were down 3.3% after founder Elon Musk on Saturday tweeted he would move the Silicon Valley car maker’s headquarters and operations out of California as the company’s main car-making factory remains closed due to the pandemic. Musk also followed through on a threat to sue Alameda County, where its Fremont plant is located.
- Shares of Coty Inc. US:COTY jumped 4.4%, after the beauty company announced that KKR & Co. US:KKR had made a $750 million equity investment, while also reporting a surprise fiscal third-quarter loss and revenue that fell more than forecast.
- AMC Entertainment Holding Inc. US:AMC shares were up nearly 44% after the Daily Mail reported that Amazon.com Inc. US:AMZN had showed interest in acquiring the movie-theater chain.
- Chesapeake Energy Corp. US:CHK added it may not be able to continue as a going concern in a recent filing. Shares were down 4.4%
- Mylan N.V.’s stock US:MYL was up 1.1% despite the pharmaceutical company’s revenues coming in a shade lower than Wall Street expectations.
How are other markets trading?
Gold for June delivery US:GCM20 was down $6.70, or 0.4%, to trade at $1,707.50, on the New York Mercantile Exchange. Crude futures for June US:CLM20 rose in volatile trade, with prices up $0.17, or 0.7%, to $24.91 a barrel, after Saudi Arabia announced an additional production cut on Monday.
As for the bond-market, the 10-year Treasury note yield BX:TMUBMUSD10Y was virtually unchanged at around 0.68%.
In currencies, the ICE U.S. dollar index US:DXY rose 0.3%, while the MarketWatch petrocurrency index US:DXY gained 0.5%.
The Stoxx Europe 600 index XX:SXXP fell 0.8%. Asian shares rallied, with Hong Kong’s Hang Seng Index HK:HSI and Japan’s benchmark Topix JP:180460 both booking a 1.5% gain on Monday.