Stocks dropped amid a selloff in big tech and speculation that this month’s rally has outpaced prospects for an economic rebound as coronavirus cases surge. Treasuries fell.
The S&P 500 retreated from a two-month high as the slide in technology shares outweighed gains in industrial and energy companies. The Nasdaq 100 slumped as much as 2.7 per cent on Tuesday. Amazon.com Inc. sank as the online-retail giant faced an antitrust complaint from the European Union, while American depositary receipts of Alibaba Group Holding Ltd. tumbled after China tightened the scrutiny over internet behemoths. Meanwhile, the Dow Jones Industrial Average outperformed as Boeing Co. extended its November rally to more than 30 per cent on news that regulators could lift the 737 Max grounding as soon as next week. The Russell 2000 Index of small caps climbed to the highest since August 2018.
After all the enthusiasm that lifted global equities and sent havens into a tailspin, some analysts said the moves may have gone too far. The coronavirus shot still has several hurdles to clear, there’s concern over fiscal stimulus, the transition of power to President-elect Joe Biden and a virus resurgence. The U.S. reported a record 142,907 new infections on Monday, and Governor Phil Murphy said New Jersey’s jump in cases is “devastating.” Despite the uncertainties, the S&P 500’s valuations are near the highest levels since the dot-com era.
“You still have a tremendous amount of uncertainty out there, and while equities may continue to climb a wall of worry, the stock market is still subject to the rules of gravity,” said Jonathan Boyar, managing director at Boyar Value Group.
With the Nasdaq Composite Index down for a second straight session, an ominous double-top pattern is forming. That should put all eyes on the 50- and 100-day moving averages as the first and second line of support for the tech-heavy gauge. Megacaps extended the slide that accompanied Monday’s rotation out of pandemic favorites and into value stocks, and potentially setting up a test of the 11,000 level around the 100-day line.
Meanwhile, China unveiled regulations to root out monopolistic practices in the internet industry, seeking to curtail the growing influence of corporations like Alibaba and Tencent Holdings Ltd. The rules, which sent both stocks tumbling and sparked a wider selloff in the nation’s equities, landed about a week after new restrictions on the finance sector that triggered the shock suspension of Ant Group Co.’s US$35 billion initial public offering.
These are some key events coming up:
- Alibaba holds its annual Singles’ Day on Wednesday, an online global shopping phenomenon that had US$38 billion of sales last year.
- European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Federal Reserve Chairman Jerome Powell are among the speakers Thursday at an online ECB Forum entitled “Central Banks in a Shifting World.”
- U.S. CPI data for October is due on Thursday.
- Finance ministers and central bankers from the Group of 20 hold an extraordinary meeting Friday to discuss bolder action to help poor nations struggling to repay their debts.
These are some of the main moves in markets:
Stocks
- The S&P 500 Index dropped 0.2 per cent at 4 p.m. New York time.
- The Stoxx Europe 600 Index increased 0.9 per cent.
- The MSCI Asia Pacific Index decreased 0.1 per cent.
Currencies
- The Bloomberg Dollar Spot Index was little changed.
- The euro was little changed at US$1.1811.
- The Japanese yen strengthened 0.1 per cent to 105.30 per dollar.
Bonds
- The yield on 10-year Treasuries gained three basis points to 0.96 per cent.
- Germany’s 10-year yield rose two basis points to -0.49 per cent.
- Britain’s 10-year yield climbed three basis points to 0.401 per cent.
Commodities
- The Bloomberg Commodity Index gained 1.7 per cent.
- West Texas Intermediate crude increased 2.7 per cent to US$41.39 a barrel.
- Gold strengthened 0.8 per cent to US$1,877.15 an ounce.
--With assistance from Cormac Mullen, Andreea Papuc, Todd White, Cecile Gutscher, Lynn Thomasson, Lu Wang, Vildana Hajric, Sophie Caronello, Nancy Moran and Claire Ballentine
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