By Anna Hirtenstein and Paul Vigna
U.S. stocks fell Tuesday, pulling back after a recent rally,
while gloomy economic forecasts suggested a recovery will be
The S&P 500 fell 0.2%, on track to break its five-session
winning streak. The Dow Jones Industrial Average dropped 183
points, or 0.7%. and the Nasdaq Composite was up 0.3%.
Overseas stocks were mainly lower as well. The pan-continental
Stoxx Europe 600 slipped 1% after reaching its highest level in
nearly a month. Hong Kong's Hang Seng Index edged down 1.4%, and
Japan's Nikkei 225 slipped 0.4%.
"We're in this wait-and-see mode," said Oanda analyst Craig
Erlam, adding traders are seizing on encouraging economic data in
the U.S. and elsewhere, but continue to worry about the pandemic.
"Every day, it seems always to be explained by optimism or
Friday's U.S. jobs report showed continued improvement in the
labor market, though unemployment is still high at 11%. That's
coming even as new cases of coronavirus in the U.S. are rising and
some states are being forced to ease off their reopening plans.
Investors are also anticipating second-quarter earnings season,
which will kick off later this month. The results are expected to
be weak, but investors will likely focus on the outlooks for this
year and next. Expectations are already very low, which could play
into the market's hands, Mr. Erlam said.
"As long as the bar is low enough, investors always find a
reason to be optimistic," he said.
Shares of airlines declined after the U.S. Treasury reached loan
agreements with five major carriers under the umbrella of the Cares
Act. Neither the amounts of the loans nor the terms were released,
but under the act, the government is required to take stakes in the
United Airlines fell 6.1%, Delta Air Lines dropped 3.2% and
JetBlue declined 3.1%.
Elsewhere, Carnival fell 4.5% after it canceled a series of
cruises planned for the fourth quarter of 2020 and beginning of
next year due to the coronavirus and resulting delays at
With investors hesitant about the economy, bonds prices and the
U.S. dollar rose. The yield on the 10-year Treasury note edged down
to 0.670% from 0.683% on Monday, declining for the second day. The
WSJ Dollar Index, which measures the dollar against a basket of
currencies, rose 0.1%.
The Organization for Economic Cooperation and Development said
Tuesday that unemployment rates in the world's advanced economies
will reach the highest level this year since the Great
The European Commission released its Summer Forecast report,
which downgraded its expectations for the trade bloc's economy. It
is now expecting a contraction of 8.3% for 2020, down from its
earlier prediction of 7.4%. It also forecast less growth next year
than previously thought, indicating a longer downturn.
"Expectations about a V-shaped recovery have taken a hit," said
Michael Hewson, a chief markets analyst at brokerage CMC Markets.
"This means there's going to be a longer bottom. It's going to take
awhile for economic activity to pick back up off the floor. It'll
be very stop-start when it comes to trying to recover normal levels
Data released on German industrial production showed a rebound
in activity in May after the country eased its lockdown, but came
in below consensus expectations. Activity was still at least 20%
below levels seen in February. Germany's DAX stock index traded
down 1.2%, among the worst performing gauges in Europe.
It "shows how difficult the return to normality will be," said
Carsten Brzeski, chief economist for the eurozone at ING. "After
the lifting of the lockdown measures, businesses must have been
more reluctant than consumers."
Investors are keeping a close eye on Covid-19 infection
"We are in a situation where the latest news from the U.S.,
Germany, parts of the U.K. and the Melbourne lockdown in Australia,
it just acts as a reminder to investors that not everything is
going to proceed on a smooth trajectory," said Peter Dixon, an
economist at Commerzbank.
In Europe, Bayer declined 5.5% after it hit a snag in the
resolution of a lawsuit about a pesticide that allegedly causes
health problems such as cancer. The judge handling the case raised
concerns on how future claims would be dealt with and Bayer said it
would address this at the preliminary approval hearing on July
Write to Anna Hirtenstein at email@example.com and Paul
Vigna at firstname.lastname@example.org
(END) Dow Jones Newswires
July 07, 2020 11:20 ET (15:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.