As investors returned from a three-day weekend, U.S. equities slumped Tuesday afternoon, with the Dow Jones Industrial Average and S&P 500 indexes pulling back from record highs, with banking and energy companies lagging the most as bond yields and oil prices plummeted. Oil prices, which had surged to six-year highs after talks between the Organization of Petroleum Exporting Countries and its allies failed to reach an agreement on a proposal to expand output in the coming months, were also being watched by investors.
What are the most important benchmarks doing?
The Dow Jones Industrial Average DJIA, -0.90% fell 394.3 points, or 1.1 percent, to 34,392.03.
The S&
The Nasdaq Composite COMP, -0.19% fell 78.23 points to 14,561.10, or less than 0.1 percent.
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 is the market’s driving force? Stocks have quietly climbed to new highs in recent weeks as investors shifted their focus to a growing economy as inflation fears faded, albeit supply-chain bottlenecks are regarded as hampering the rise. 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.” 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. The Invesco S&P 500 Equal Weight ETF RSP, -1.18 percent, is an example of this method, according to Walsh. According to FactSet, the exchange-traded fund is up about 18% this year as of Tuesday afternoon trading. According to FactSet data, the S&P 500 index has gained roughly 15% year to date, with information technology as its largest sector exposure. 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. Goldman Sachs GS, -1.50 percent, and JP Morgan JPM, -2.00 percent, both lost ground. Nonetheless, as the second half of the year begins, analysts say the overall picture remains optimistic. “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. Read more about what to expect if “peak everything” has already happened and markets are feeling the pull of gravity once more. See also: Is the market pricing in ‘peak growth’? According to a top strategist, these graphs show as much. Oil prices were once again in the spotlight, with crude benchmarks retreating from highs last seen in 2014. Chevron CVX, -1.96 percent, is the worst-performing energy stock. 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 are being scrutinized?
AMC Entertainment Holdings Inc. AMC, -0.68 percent, a popular meme stock, dipped 0.5 percent after the movie theater company announced it will no longer seek shareholder approval to sell more shares.
Didi Global Inc. DIDI, -20.67 percent, a Chinese ride-hailing app, had its stock tumble nearly 20% after the Chinese Cyberspace Administration prohibited new customers from signing up for DiDi’s ride-hailing app due to security concerns.
Full Truck Alliance YMM, -16.19 percent shares were down 17.5 percent, while Kanzhun Ltd. BZ, -17.13 percent shares were down 17.2 percent, as their apps were also blocked. Existing app users will be able to continue to use their services.
Nextdoor Inc. is ready to go public, with the neighborhood network business announcing a merger agreement with special-purpose acquisition company Khosla Ventures Acquisition Co. II KVSB, +5.90 percent on Tuesday. The merged company is valued at around $4.3 billion. The stock of KVSB increased by more than 5%.
What is the state of other markets?
The yield on the ten-year Treasury note TMUBMUSD10Y, 1.381 percent, fell 6.7 basis points to 1.370 percent. The yield curve and the price of debt move in opposite directions.
The ICE U.S. Dollar Index DXY, +0.42 percent, which measures the currency against a basket of six main competitors, increased by 0.5 percent.
On the New York Mercantile Exchange, the US oil benchmark CL00, -2.20 percent fell 2.7 percent to $73.13 a barrel. Gold futures GC00, +0.55 percent increased by 0.5 percent to $1,792.70 per ounce.
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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