Stocks Fall After Dow, S&P Hit Record

By Jem Bartholomew and Paul Vigna

U.S. stocks fell Tuesday as the major benchmarks pared back gains a day after they closed at record highs.

The Dow Jones Industrial Average fell 320 points, or 1.1%, after setting a record on Monday and closing just short of the 30000-point milestone level.

The S&P 500 slipped 0.8% while the Nasdaq Composite was down 0.3%. The Nasdaq's narrower losses are at least partially due to Tesla, up 12%, which is being added to the S&P 500. However, the much-anticipated change won't be effective until Dec. 21, so while the Nasdaq is getting a boost on the news, the S&P 500 isn't. It adds to the advantages tech stocks have enjoyed lately.

"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."

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 out 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.

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.

"Attention might be drawn from the light at the end of the tunnel back toward some of the short-term difficulties," said Paul O'Connor, head of the U.K.-based multiasset team at Janus Henderson Investors. "The data on the coronavirus front are looking really troublesome in the U.S., the virus is surging across the U.S."

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.

In corporate news, Tesla jumped 12% 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 had already propelled its stock up roughly 480% this year.

Walgreens Boots Alliance tumbled 8% after Amazon.com said it is launching a rival online pharmacy. CVS Health dropped 7.5%.

"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 0.869%, from 0.906% Monday.

Overseas, the pan-continental Stoxx Europe 600 index ticked down 0.5%, 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%, while Hong Kong's Hang Seng Index ticked up 0.1%. China's Shanghai Composite Index fell 0.2%.

Write to Jem Bartholomew at [e-mail] and Paul Vigna at [e-mail]

(END) Dow Jones Newswires

11-17-20 1048ET