Dow, S&P 500 on Track for Second Straight Day of Losses
April 20 2021 - 12:39PM
Dow Jones News
By Will Horner
U.S. stocks slipped Tuesday, on track to extend their losses as
investors assess blue-chip companies' profits and sales
prospects.
The Dow Jones Industrial Average dropped 0.9%, while the S&P
500 fell 0.8% and the Nasdaq Composite lost 1.1%. All three indexes
also declined Monday, breaking a recent winning streak.
Investors are looking to companies' first-quarter earnings and
their outlooks for the rest of the year to gauge whether valuations
on stocks are justified. Strong U.S. economic data has bolstered
expectations and fueled the recent rally that has left major
indexes hovering close to records. Rising Covid-19 infection levels
in some countries and signs that the vaccine rollout may be
faltering are now tempering that optimism.
"All these company share prices are near or close to record
highs and we are seeing a lot of people taking money off the
table," said Michael Hewson, chief market analyst at CMC Markets.
"There is a general lack of impetus."
Investors entered earnings season with high expectations,
particularly for economically sensitive stocks such as banks and
retail that stand to win the most from the economy reopening.
Netflix is expected to post its results after markets close
Tuesday.
"The only risk is that expectations across the board are so
high, they are going to be very difficult to meet," said Seema
Shah, chief strategist at Principal Global Investors. "We are
getting into territory -- both with earnings and economic data --
where it will be very difficult to have positive surprises."
Airline stocks were among Tuesday's losers. United Airlines fell
more than 9% after reporting weaker-than-expected results for the
first quarter. Other airlines followed, with American Airlines and
Delta Air Lines dropping 6.6% and 4.5%, respectively. Alaska Air
Group fell 4.2%.
"Air travel is really a story of two segments," said Ed Keon,
chief investment strategist at QMA. "Leisure travel is back, but
business travel is still way down, and business travelers are how
airlines make their money, especially on international business
travel, and that segment is still moribund. So the airlines have
bounced quite a bit off their lows as a result of leisure travel,
but to really get back to profitability, they need the business
traveler to come back, and that is still happening very
slowly."
Shares of manufacturing and tech companies, however, may benefit
in the continued months, Mr. Keon said, as the global shortage of
computer chips, lumber and other supplies continues.
"These may not last forever, but at least for the moment there
are spot shortages both of goods and ways of getting those goods to
customers," he said. "That is likely to continue to put some upward
pressure on some of those products and services."
Kansas City Southern jumped nearly 16% after Canadian National
Railway said it plans to offer $30 billion for the railway
operator, likely sparking a bidding war. These gains put the
company on pace for its largest percent increase since March 24,
2020, when it rose 22%.
In the bond market, the 10-year U.S. Treasury yield was largely
unchanged from 1.599% on Monday. Yields fall as prices rise.
Dogecoin, the cryptocurrency created as a joke, pared gains
after climbing more than 8,000% this year. By Tuesday, it fell to
36 cents, according to CoinDesk, but some users of online forums
have said they plan to push the cryptocurrency to $1 by closing
time, in what some have called "Doge Day."
Overseas, the pan-continental Stoxx Europe 600 fell 1.9%. The
U.K.'s FTSE 100 retreated 2% as tobacco companies dropped.
In Asia, major stock indexes were mixed. Japan's Nikkei 225 fell
2%, while Hong Kong's Hang Seng ticked up 0.1%. The Shanghai
Composite Index edged down 0.1%.
Julia Carpenter contributed to this article.
Write to Will Horner at William.Horner@wsj.com
(END) Dow Jones Newswires
April 20, 2021 12:24 ET (16:24 GMT)
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