Written by STAN CHOE and ALEX VEIGA AP Business Writers
Banks and companies that rely on consumer spending led stocks broadly lower on Wall Street Tuesday, as the market gave back some of the big gains it made the past couple of weeks. The S&P 500 fell 1.1%, snapping a five-day winning streak. Stocks sank more across the Atlantic after the European Union said this year’s recession will be deeper than earlier forecast. Gold and silver prices rose, and the 10-year Treasury yield fell.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story is below.
Banks and companies that rely on consumer spending led stocks broadly lower on Wall Street Tuesday, as the market gave back some of the big gains it made the past couple of weeks.
The S&P 500 was down 0.6% after spending most of the day in the red. The selling put the benchmark index on pace to snap a five-day winning streak.
The market’s slide followed a deeper sell-off in France, Germany and elsewhere after the European Union’s executive arm said this year’s recession caused by the coronavirus pandemic will be deeper than forecast.
It also said next year’s expected rebound could be weaker than expected.
The Dow Jones Industrial Average was down 295 points, or 1.1%, at 25,991.
Big technology stocks helped drive early gains for the Nasdaq, but they faded by afternoon, knocking the index 0.3% lower. Small company stocks were down more than the rest of the market. The Russell 2000 index was off 1.4%.
The U.S. stock market has been churning over the last month, with big daily moves up and down keeping it roughly in place. It’s been a small-scale version of the market’s movements since the start of the year, when a nearly 34% plunge on worries about the pandemic-caused recession quickly gave way to a tremendous rally that brought the S&P 500 nearly back to its record level.
Lifting markets higher on one end are reports showing budding improvements in the economy. The job market, retail sales and other economic indicators are all still well below where they were before the pandemic struck. But they’ve stopped plummeting and have begun to grow again as governments relax restrictions meant to slow the spread of the coronavirus.
That’s combined with unprecedented amounts of aid from central banks and governments around the world to prop up markets. It also helped send the S&P 500 up 1.6% on Monday, following up on a 4% rise the prior week, which itself helped cap the best decade for the index since 1998.
“The economic data that has come out over the past couple of months has actually beaten even the most optimistic economists, so in that scenario it’s not surprising to see a euphoria-driven rally in the market,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.
But pulling markets lower on the other end are worries that the optimism is overdone. The pandemic isn’t going away, with infection levels worsening across wide swaths of the U.S. South and West, among other global hotspots. The concern is that could keep households and businesses nervous and scare them away from spending. In the worst-case scenario, it could force governments to bring back some of the restrictions that sent the economy into its sudden recession.
Such worries spilled through markets Tuesday after the European Commission unveiled its more dour economic forecasts for 2020 and 2021.
“The road to recovery is still paved with uncertainty,” EU Economy Commissioner Paolo Gentiloni told reporters in Brussels. “This is mostly linked to the epidemiological uncertainty.”
The commission said the joint economy of the 27 nations in the European Union will shrink 8.3% this year, before growing 5.8% in 2021. In the previous forecasts released in May, it had forecast the economy would contract about 7.5% this year and bounce back 6% next year.
Underscoring the fragility, a separate report showed that industrial production in Germany rebounded by less than economists expected in May, and remains far below levels from before the pandemic caused factories to close.
Germany’s DAX lost 0.9%, while France’s CAC 40 fell 0.7%. The FTSE 100 in London dropped 1.5%. Markets in Asia also fell.
In the U.S. market, airlines and stocks of other companies that most need the economy to get closer to normal had the sharpest losses.
United Airlines slid 7.9%, American Airlines dropped 6.3% and mall-owner Simon Property Group dropped 4.2%.
Energy stocks fell 2.5% for the largest loss among the 11 sectors that make up the S&P 500. They’ve swung sharply with expectations for the economy’s health and demand for oil and gasoline. Devon Energy lost 6.9%, while Valero Energy fell 5.8%.
Benchmark U.S. crude slipped a penny to settle at $40.62 per barrel after earlier flipping between losses and gains. Brent crude, the international standard, fell 2 cents to close at $43.08 per barrel.
The yield on the 10-year Treasury slipped to 0.64% from 0.68% late Monday. It tends to move with investors’ expectations for the economy and inflation.