Stocks Close Lower After Dow, S&P Hit Records Monday -- Update

U.S. stocks fell Tuesday, a day after they closed at record highs, as investors weighed optimism about potential Covid-19 vaccines against a surge of the virus in the U.S.

The Dow Jones Industrial Average fell 167.09 points, or 0.6%, to 29783.35, after closing just short of the 30000- point milestone level on Monday.

The S&P 500 fell 17.38 points, or 0.5%, to 3609.53. The Nasdaq Composite slipped 24.79 points, or 0.2%, to 11899.34.

Investors were focused on surging coronavirus infections and their effect on the economy.

The number of newly reported Covid-19 cases in the U.S. jumped on Monday to over 166,000 cases from a day earlier, and the number of those hospitalized hit another record. Local authorities across the country are imposing fresh restrictions on social activity to curb the outbreak, which could hobble the economy in the winter months.

"Obviously, the elephant in the room is the incredible surge in Covid cases we're now seeing," said Oanda analyst Craig Erlam. Investors are mostly discounting the new wave, but its effects could last longer and be much worse than they expect, he said.

"It has been and remains the greatest downside risk for these markets, which are now sitting in pretty frothy territory again," he said.

That new wave of infections is already having an economic effect. Fresh data Tuesday showed that retail sales rose 0.3% in October, well below the 1.6% gain in September. Industrial production rose 1.1% in October, but output for the month was still 5.6% lower than its pre-pandemic February level.

Investors have been showing a higher tolerance for risk since Joe Biden was projected to be the president-elect, said Max Gokhman, the head of asset allocation at Pacific Life Fund Advisors in Newport Beach, Calif. That tolerance spurred some contrarians to go against the grain, he said. "Whenever we hit all-time highs, especially in this market, you're always going to have someone who takes the other side."

On Monday, the S&P 500, DJIA and Russell 2000 small-cap stock index all hit records, the first time all three indexes closed at all-time highs on the same day since Jan. 22, 2018, according to Dow Jones Market Data. It was the latest sign that the market rally was broadening beyond tech to growth-sensitive sectors.

That rally has come amid a wave of good news from pharmaceutical companies racing to develop a Covid-19 vaccine. On Monday, Moderna Inc. reported positive results from a trial of its experimental vaccine. Any vaccine, however, is in a race against time.

In other corporate news, Walmart Inc. said Tuesday its quarterly sales rose at a slower pace than earlier in the coronavirus pandemic even as shoppers continued to buy up food and cleaning supplies and the retailer pushed early holiday deals. Walmart shares fell 2% $149.37.

Tesla Inc. jumped 8.2% to $444.61 as investors prepared for the electric-car maker to be added to the S&P 500 index on Dec. 21. The move is expected to galvanize the company's bullish investors, who have propelled its stock up 428% this year.

"If you look at the world today, specifically the developed world today, growth is going to be difficult to come by," said Randeep Somel, fund manager at M&G Investments. Technology companies "are enough of a disruptive force to take away business from existing companies, existing sectors, existing industries, without having to have the wider market -- GDP plus 2-3% -- to grow in order to see that."

Walgreens Boots Alliance Inc. tumbled 9.6% to $39.85 after Amazon.com said it is launching a rival online pharmacy. CVS Health Corp. dropped 8.6% to $67.14.

"There is still plenty of wind out there. It's just a question of getting the sails right in order to catch it," said Peter Dixon, senior economist at Commerzbank. "There's always going to be the sense that the initial burst of enthusiasm is followed by a little bit of retrenchment."

The yield on 10-year U.S. Treasury notes slid to 0.872%, from 0.906% Monday. Among commodities, gold prices slipped 0.15% to $1,884.50 and crude oil rose 0.2% to $41.43.

Overseas, the pan-continental Stoxx Europe 600 index ticked down 0.2% to 388.82, led lower by the U.K.'s largest stocks.

Most major Asian equity benchmarks ended the day with muted gains. Japan's Nikkei 225 index rose 0.4% to 26014.62, while Hong Kong's Hang Seng Index ticked up 0.1% to 26415.09. China's Shanghai Composite Index fell 0.2% to 3339.89.

Write to Jem Bartholomew at jem.bartholomew@wsj.com and Paul Vigna at paul.vigna@wsj.com


  (END) Dow Jones Newswires
  11-17-20 1752ET
  Copyright (c) 2020 Dow Jones & Company, Inc.

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