Tough day for stocks, mega-caps led retreat
08-Sep-20 16:10 ET
Dow -632.42 at 27490.89, Nasdaq -465.44 at 10847.70, S&P -95.12 at 3331.84
briefing.com
[BRIEFING.COM] The S&P 500 fell 2.8% on Tuesday in a broad-based retreat led by the mega-cap stocks. The Nasdaq Composite underperformed with a 4.1% decline, while the Dow Jones Industrial Average (-2.3%) and Russell 2000 (-2.0%) declined closer to 2.0%.
Today's selling was largely a continuation of last week, but unlike Friday, buyers appeared unwilling to buy the dip. Apple (AAPL 112.82, -8.14, -6.7%) and Tesla (TSLA 330.21, -88.11, -21.1%), which led the market on the way up, led the market lower today, with Tesla shareholders discontent that the S&P 500 Index Committee snubbed the stock from the benchmark index.
Tesla's 21% decline was a drag on the Nasdaq, while Apple's 7% decline pressured the large-cap indices and the S&P 500 information technology sector (-4.6%). The energy (-3.7%) and financials (-2.6%) sectors followed suit amid weaker oil prices ($36.76/bbl, -2.94, -7.4%) and lower Treasury yields, while the utilities sector (-0.6%) declined the least.
Besides concerns that the market's pullback had more room to go, investors had to contend with Democratic leadership rebuffing the Senate's $300 billion coronavirus relief bill, President Trump suggesting disincentives for U.S. companies to outsource jobs to China, and reports that China's largest semiconductor foundry could be added to a trade blacklist.
The prospect of potential retaliation on U.S. semiconductor companies was an additional drag on the Philadelphia Semiconductor Index (-4.7%). Separately, Boeing (BA 161.08, -9.97, -5.8%) provided a disappointing update, saying 787 Dreamliner production problems have slowed the pace of deliveries.
There were some notable winners, though. Nikola (NKLA 50.05, +14.50, +40.8%) and General Motors (GM 32.38, +2.38, +7.9%) formed a strategic partnership that was well-received by investors. Walt Disney (DIS 134.20, +2.21, +1.7%) was upgraded to Buy from Hold at Deutsche Bank.
U.S. Treasuries saw increased buying interest amid the decline in equities but closed off highs. The 2-yr yield declined two basis points to 0.14%, and the 10-yr yield declined four basis points to 0.68%. The U.S. Dollar Index rose 0.8% to 93.46. Oil prices were pressured by Saudi Aramco lowering its prices for buyers in Asia and the U.S. due to sluggish demand.
Reviewing Tuesday's economic data:
- Consumer credit increased by $12.3 billion in July (Briefing.com consensus $12.0 billion) after increasing an upwardly revised $11.4 bln (from $8.95 billion) in June.
- The key takeaway from the report is that July marked the fifth straight monthly contraction in revolving credit, which is something that hasn't happened since late 2010 - early 2011, underscoring the more restrictive credit stance adopted by lenders in the wake of the COVID shutdown and spike in unemployment.
- The NFIB Small Business Optimism Index for August increased to 100.2 from 98.8 in July.
Looking ahead, investors will receive the weekly MBA Mortgage Applications Index and the JOLTS - Job Openings report for July on Wednesday.
- Nasdaq Composite +20.9% YTD
- S&P 500 +3.1% YTD
- Dow Jones Industrial Average -3.6% YTD
- Russell 2000 -9.8% YTD
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