Stocks fell on Monday, giving back some of last week’s solid gains, amid jitters about reopening the economy too soon.
The Dow Jones Industrial Average traded 227 points lower, or 0.9%. The S&P 500 dropped 0.6%. The Nasdaq Composite recovered its earlier losses, trading 0.1% higher as Amazon, Netflix, Alphabet and Apple all rose.
A jump in infections in South Korea and other countries that appeared passed the worst of the coronavirus stoked some jitters here. Stocks that would benefit most from reopening led the losses including airlines, retailers, cruise lines and casinos.
“I think this part of the bounce was easy to forecast, I think what happens from here again depends a lot on Covid stuff,” said Paul Tudor Jones, founder of Tudor Investment Corp., on CNBC’s “Squawk Box.” “There’ll be a shift in focus from liquidity issues somewhere down the line to solvency issues. If we don’t find a vaccine or a cure, if we don’t find a much better way of testing at scale … then I think the market’s going to have a much more difficult time.”
The S&P 500 gained more than 1% on Thursday and Friday, leading to the broader-market average’s first weekly advance in three weeks. The broader market index rallied 3.5% last week. On Friday, investors shrugged off the biggest one-month job losses on record as expectations of an economic reopening outweighed the negative data.
South Korea warned of a new cluster of cases involving night clubs and the number of new coronavirus cases worldwide reached 4 million. Singapore and Japan also confirmed new cases.
“The world very much remains on the path to reopening, a process that will accelerate over the coming weeks,” said Adam Crisafulli, founder of Vital Knowledge, in a note. He added, however, the S&P 500 is still overbought at current levels even as expectations of a gradual resumption of economic activity continue to increase.
“There will be a reckoning around the reopening and linearity narratives (i.e. both are too sanguine right now),” Crisafulli wrote.
The S&P 500 has rallied more than 33% since hitting an intraday low on March 23. That surge has been led largely by mega-cap tech stocks such as Facebook, Amazon, Apple, Netflix, Google-parent Alphabet and Microsoft. Those stocks have all soared more than 20% since late March.
Stocks that would benefit from the economy reopening are also up sharply since then. MGM Resorts has soared more than 70% while Disney is up 27.3% in that time.
But those stocks were down Monday. Disney lost 1.2%. MGM fell 3.6%. United Airlines lost 3.6%.
Despite the market’s strong performance at the index level, Dan Russo of Chaikin Analytics thinks that under the surface, “the real story has been unfolding.”
“Over the past three months, which roughly lines up with the top in the S&P 500, it is the economically sensitive cyclical sectors of the market that have lagged,” the firm’s chief market strategist said in a post, highlighting the performance of energy, financials and industrials over that time period. All three of those sectors are down more than 24% over the past three months.
Apple said Friday it will start to reopen U.S. stores this week. The stores, Apple said, will have temperature checks and will limit the number of customers inside the store at once. Apple shares lost 0.7% Monday.
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U.S. stock futures rose on Monday morning after Wall Street posted consecutive rallies to end last week amid the prospects of the global economy reopening soon.