Weakness in tech companies leads stocks lower on Wall Street
U.S. stock indexes pulled back from their recent record highs Wednesday, as virus cases surge and coronavirus vaccines move closer to distribution.
The S&P 500 index fell 0.8%, as losses in technology companies outweighed gains in industrial, energy and materials stocks. The benchmark index is still up 1.4% for the month after climbing to record highs four times in the past two weeks.
Markets have been mostly pushing higher in recent weeks on hopes that one or more coronvairus vaccines will begin to be distributed in coming weeks and begin to ease the economy out of the pandemic’s grip.
A vaccine from Pfizer and German partner BioNTech, which is already in use in the U.K., is on track for a positive review and potential approval in the U.S. within the next week. The Food and Drug Administration will also consider a vaccine developed by Moderna later this month.
But there could be more economic damage in store over the next few months and investors are still closely watching Washington for any developments on another shot of stimulus for people, businesses and state governments. Congress is still divided over the size and scope of any new package and the Trump administration has added to the potential plans with a new $916 billion proposal.
"You haven’t seen a deal out of Congress, so to the extent that markets have been rallying on another round of hope about stimulus, not getting that lets a little bit of air out of the market," said Willie Delwiche, investment strategist at Baird.
The S&P 500 dropped 29.43 points to 3,672.82. The Dow Jones Industrial Average lost 105.07 points, or 0.4%, to 30,068.81. The tech-heavy Nasdaq composite fell 243.82 points, or 1.9%, to 12,338.95.
The Russell 200 index of small company stocks gave up 15.63 points, or 0.8%, to 1,902.15. Small company stocks have been outgaining the broader market this month and the Russell 2000 is holding onto a 4.5% gain.
Technology stocks fell and dragged much of the market with them. Health care and communications stocks also slipped. Microsoft shed 1.9% while Pfizer Inc. fell 1.7%.
About 56% of the companies in the S&P 500 fell, led by Qorvo, which declined 5.6%.
Treasury yields gained ground in a sign of optimism for the the economy. The yield on the 10-year Treasury rose to 0.94% from 0.90% late Tuesday.
Investors still have an appetite for IPO’s as meal delivery service DoorDash soared 85.8% in its market debut. The company has been one of the beneficiaries of the stay-at-home economy as more people shop and order food from their homes.
The market has generally been making gains as investors weigh the continued economic damage being inflicted by the virus against anticipation for a return to normalcy as vaccines start to move closer to approval and wider distribution. The recent surge in coronavirus cases and tighter restrictions on businesses over the last few weeks has again raised the importance of a vaccine for beaten down businesses.
Looking ahead, the economy will likely still have a long way to recovery in 2021, said Barry Bannister, head of institutional equity strategy at Stifel.
"What we’ve said is the sky is not falling, but there are some dark clouds and indexes are showing signs of fatigue," he said.
European markets ended mixed. France’s CAC 40 was down 0.3%, Germany’s DAX rose 0.5% and the FTSE 100 in London rose 0.1%. Asian markets mostly rose.