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 as many as 430 points Tuesday morning after setting a record on Monday and closing just short of the 30000-point milestone level. Most recently, it was down 175 points, or 0.6%. The S&P 500 slipped 0.4% while the Nasdaq Composite was down 0.1%.

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. "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 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.

"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.

Another troubling sign: Walmart Inc.'s 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 were down 0.2%.

In other corporate news, Tesla jumped 8% 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.

The Nasdaq's somewhat narrower losses are at least partially due to Tesla's strong returns. However, the much-anticipated change won't be effective for more than a month, so while the Nasdaq is getting a boost from 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."

Walgreens Boots Alliance tumbled 9% after Amazon.com said it is launching a rival online pharmacy. CVS Health dropped 8%.

"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 0.2%, 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 1228ET