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Stocks fell on Tuesday as investors took a breather following strong gains over the past week while they evaluated the latest attempts to reopen the economy.
The Dow Jones Industrial Average traded about 200 points lower, or 0.8%. The S&P 500 dipped nearly 1% while the Nasdaq Composite fell 0.8%, coming off a six-session winning streak. The S&P 500 and the Nasdaq remained up 1.2% and 3.5%, respectively, over the past week while the Dow had risen 0.6% over that time.
Stocks poised to benefit from economies reopening — retail and real estate— rolled over in afternoon trading, dragging down the major averages. Investors also cooled off from buying technology stocks, allowing the tech-heavy Nasdaq Composite to slip into the red.
The major averages fell to their lows of the day after Senator Lindsey Graham introduced legislation to require China to cooperate with a coronavirus investigation or face sanctions.
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, and other health officials testified before the Senate Health Committee to discuss reopening the economy. Fauci noted a vaccine will be essential in stopping the coronavirus spread, but warned it will be a while before a usable one is available.
“Markets have been torn between optimism on the tentative re-opening of some economies and caution on the still grim economic data,” Mike Pyle, global chief investment strategist at BlackRock Investment Institute, said in a note. “Markets will watch out for any cracks in the financial system and elsewhere in the economy as virus infections climb.”
Former FDA Commissioner Scott Gottlieb said Tuesday he expects coronavirus cases to rise as more states reopen. The World Health Organization said Monday several countries that eased coronavirus restrictions, including China, have seen increases in the number of positive Covid-19 cases.
More than 4 million cases have been confirmed globally, according to Johns Hopkins University. In the U.S. alone, over 1.3 million infections have been confirmed.
Tuesday’s moves came as the Federal Reserve started buying corporate bonds and some of the ETFs that track them. The Fed announced these programs last month as they try to cushion the economic blow from the coronavirus pandemic. The iShares IBoxx Investment Grade Corporate Bond ETF (LQD) climbed more than 1%.
“The Fed’s actions so far also point to a willingness to do more if required,” said Oliver Jones, senior market economist at Capital Economics. “The size of the programs could presumably be increased too if market conditions deteriorated, albeit with the Treasury providing more equity.”
Despite Tuesday’s losses, the Nasdaq remained up about 1.6% for the year as Wall Street has recently loaded up on shares of major tech companies. Shares of Amazon and Netflix both soared more than 30% this year, while Microsoft gained 18%. Chipmaker Nvidia hit a fresh all-time high on Tuesday, bringing its 2020 gains to 38%.
“Growth has been bulletproof in 2020,” Stephen Suttmeier, Bank of America’s technical research strategist, said in a note on Monday. “No change in leadership as the 2020 parabolic rise for Growth vs Value achieves the Y2K Tech Bubble peaks.”
While bouncing swiftly from their March lows, the S&P 500 and the Dow are still well in the negative territory for the year, down 9.3% and 15.1%, respectively. Energy remains the worst-performing sector among the 11 S&P 500 groupings, with a 37% loss in 2020.
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