The Dow Jones Industrial Average and the S&P 500 index fell from record highs Tuesday, while the Nasdaq soared to a new high, with financial and energy companies lagging the most as bond yields and oil prices plummeted. Oil prices fell after talks between the Organization of Petroleum Exporting Countries and its partners failed to reach an agreement on a proposal to expand supply in the coming months, causing investors to keep a close eye on the market.
What are the most important benchmarks doing?
The Dow Jones Industrial Average DJIA, -0.60 percent fell 208.98 points to 34,577.37, a decline of 0.6 percent.
The S&
In late afternoon trade, the Nasdaq Composite COMP, +0.17% gained 24.32 points, closing 0.2 percent higher at a new high of 14,663.64.
Markets in the United States were closed on Monday in honor of Independence Day, which fell on Sunday. On Friday, the S&P 500 set a new high for the seventh day in a row, the longest such sequence since 1997, while the Nasdaq Composite and Dow also hit new highs. What was the market’s driving force? Stocks fell on Tuesday as investors pushed the market to new highs in recent weeks on the back of a growing economy, while supply-chain constraints are expected to hamper the recovery. According to the Institute for Supply Management, the service sector purchasing managers index decreased to 60.1 percent in June from a high of 64 percent in May. A value of greater than 50% shows that activity is increasing. The final June services PMI from IHS Markit dipped to 64.6, down from 70.4 in May. In a report, Michael Pearce, senior U.S. economist at Capital Economics, said, “The dip in the ISM services index in June shows that shortages and price rises are becoming an increasing drag on hiring and economic activity.” According to Michael Arone, chief investment strategist at State Street Global Advisors’ U.S. SPDR division, the results are still “strong,” but the ISM services index’s larger-than-expected decrease has heightened investor concerns about the economic recovery’s strength. In an interview Tuesday, he added, “It raises the question, are we over the pandemic’s top in terms of the economy rebounding?” Read more about what to expect if “peak everything” has already happened and markets are feeling the pull of gravity once more. Investors, according to Arone, would be focusing on what “business executives have to say about the future” when they begin releasing their second-quarter earnings results in the coming weeks. Meanwhile, a stock market slowdown would be “good,” he added, adding that he believes stocks will continue to rise this year. In a phone interview Tuesday, Brian Walsh Jr., a financial advisor with Wayne, Pennsylvania-based wealth manager Walsh & Nicholson Financial Group, said that low interest rates and pent-up consumer demand should help equities continue to prosper in the short run. Inflation is a major concern for Walsh, who noted much increased restaurant pricing over the July 4 holiday weekend while visiting a “crowded” Jersey Shore. Walsh described the crowds he saw as “beyond pre-pandemic.” “It was a swarm of people.” Walsh & Nicholson Financial Group, which manages around $1 billion in assets, prefers high-quality businesses with strong cash flows that can withstand growing inflation. He explained, “We have a strong bias toward high-quality, dividend-paying companies.” Walsh also stated that he is avoiding fresh money in growth stocks owing to concerns about high valuations, and that he prefers an equal-weighted approach to investing in S& 500 index equities to avoid a top-heavy exposure to technology. This method, according to Walsh, is exemplified by the Invesco S&P 500 Equal Weight ETF RSP, -0.87 percent. According to FactSet, the exchange-traded fund has gained 18.3 percent this year through Tuesday. The S&P 500 index, whose largest sector exposure is information technology, has gained nearly 15.6 percent year to date, according to FactSet data. Meanwhile, Treasury prices rose, forcing yields lower, with the benchmark 10-year Treasury note’s rate falling below 1.40 percent once again. Falling yields assist technology and other growth sectors that are more interest rate sensitive, while undermining bank stocks that benefit from higher long-term rates. Both Goldman Sachs GS and JP Morgan JPM declined by 1.15 percent and 1.68 percent, respectively. Even as the S&P 500 and Dow sank, the tech-heavy Nasdaq climbed to a new high. As the second half of the year begins, analysts say the overall picture remains good. “After a favorable close to Q2, risk sentiment remains optimistic as we start the second half of the year. The S& What You Should Know: Here’s what may convert a stock market pause into a larger correction. Increased COVID-19 vaccinations and central bank stimulus are seen as contributing to strong economic growth, while fears of uncomfortably high inflation have been kept at bay because the Federal Reserve and other central banks insist that increased price pressures are a temporary phenomenon caused by supply-chain bottlenecks, he said. According to Mark Yusko, the firm’s founder, chief executive officer, and chief investment officer, Morgan Creek Capital Management has been taking profits from growth stocks while “modestly” expanding its short exposure in equities on concerns that the market has grown too concentrated in tech. Yusko told MarketWatch on Tuesday that the rise in share prices of some tech firms, such as Nvidia Corp. NVDA, +1.03%, has gone too far in his opinion, even if the companies are strong. See also: Is the market pricing in ‘peak growth’? According to a top strategist, these graphs show as much. Meanwhile, oil prices have come back into focus, with crude benchmarks retreating from highs last seen in 2014. Energy stocks were headed lower by Chevron CVX, -1.96 percent. The talks were called off on Monday after the United Arab Emirates refused to budge on its demand to raise the baseline used to set its output level and opposed to a plan to prolong the framework for the current supply-cut program from April 2022 to the end of next year. Which businesses were the subject of the investigation?
AMC Entertainment Holdings Inc. AMC, -3.85 percent, a popular meme stock, finished 3.9 percent down after the movie theater chain announced it will no longer seek shareholder approval to sell more shares.
Didi Global Inc. DIDI, -19.58 percent, a Chinese ride-hailing firm, saw its stock plummet 19.6 percent after the Chinese Cyberspace Administration prohibited new customers from signing up for DiDi’s ride-hailing app due to security concerns.
Because their apps were also limited, Full Truck Alliance YMM, -6.68 percent shares dropped 6.7 percent, and Kanzhun Ltd. BZ, -15.95 percent shares dropped 16 percent. Existing app users will be able to continue to use their services.
Nextdoor Inc. is preparing to go public, with the neighborhood network business announcing a merger agreement with special-purpose acquisition company Khosla Ventures Acquisition Co. II KVSB, +16.04 percent on Tuesday. The merged company is valued at around $4.3 billion. The stock of KVSB increased by 16 percent.
After the Department of Defense abandoned its $10 billion JEDI potential deal with Microsoft MSFT, +0.00 percent, Amazon AMZN, +4.69 percent surged 4.7 percent to a new high.
Instead, the department is starting a new contract and inviting Amazon and Microsoft to submit ideas.
What happened in other markets?
The 10-year Treasury note yield TMUBMUSD10Y, 1.351 percent, fell 6.5 basis points to 1.369 percent, the highest one-day loss since June 4. The yield curve and the price of debt move in opposite directions.
The ICE U.S. Dollar Index DXY, +0.37%, which measures the currency against a basket of six major rivals, increased by 0.3 percent.
On the New York Mercantile Exchange, the US oil benchmark CL00, -1.80 percent finished considerably lower, down 2.4 percent to $73.37 a barrel. Gold futures GC00, +0.77% climbed 0.6 percent to $1,794.20 an ounce, settling at $1,794.20.
European stocks ended the day lower, with the FTSE 100 UKX, -0.89% down 0.9 percent and the Stoxx Europe 600 index SXXP, -0.52 percent down 0.5 percent.
In Asia, the Shanghai Composite SHCOMP, -0.11 percent declined 0.1 percent, while Hong Kong’s Hang Seng Index HSI, -0.25 percent dropped 0.3 percent and Japan’s Nikkei 225 NIK, +0.16 percent jumped 0.2 percent./n
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