Wall Street Close: S&P 500, Dow see minor pullback from Monday’s all-time closing highs
- S&P 500, Dow and Nasdaq Comp all close with minor losses, with the former two pulling back from Monday’s record close.
- Vaccine optimism, dovish FOMC language kept sentiment underpinned and the S&P 500 above 3600.
The S&P 500 closed 0.48% lower at 3609, the Dow Jones 0.56% lower at 29784 and the Nasdaq Composite Index 0.2% lower on Tuesday, with the S&P 500 and Dow pulling back from Monday’s record high closing levels. A more than 8% jump in Tesla’s (TSLA) share price on the news that the electric car maker is to be added to the S&P 500 index helped the Nasdaq 100 outperform.
US equities undergo a pullback, but sentiment remains broadly underpinned
Profit-taking/position adjustment was likely in play as US equities fell back from near all-time high levels on Tuesday. However, early evidence of the coming Q4 slowdown in US growth came on Tuesday in the form of underwhelming October retail sales numbers didn't help - with many of the US having going back into lockdown amid surging virus cases, most agree that the slowdown is activity is set to continue, and some analysts are already calling for a return to negative MoM growth by Q1 2021.
US equities thus saw downside in the immediate aftermath of Tuesday’s retail sales data as at 13:30GMT, followed by an initially bearish US equity cash open at 14:30GMT, that saw the S&P 500 drop below 3600 and as low as 3584. However, dips buyers came in aggressively to push the index back above the 3600 mark and keep it there until the close.
Monday’s positive vaccine news from Moderna, which came on the back of similarly positive results from Pfizer/BioNtech a week earlier, likely continues to underpin risk appetite (and keep the S&P 500 above 3600). Moreover, the increasingly concerned tone of the FOMC regarding the near-term economic outlook reinforces the notion that ultra-easy Fed policy is going nowhere soon; FOMC Chair Powell, as well as FOMC members Barkin and Bostic, all sounded very concerned about the US economy as it returns to lockdown to contain Covid-19, with Bostic hinting that if fiscal stimulus from Congress is not forthcoming, the Fed might have step in with its own measures to get help to where it's needed. These comments came on the back of Clarida seemingly raising the bar for rate hikes down the line by suggesting the Fed would also be looking at the participation rate when assessing whether the economy had returned to full employment or not.
Key S&P 500 levels