S&P 500, Dow fall a day after closing at records as retail sales shows slowest growth in six months

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The Dow Jones Industrial Average dropped 167.09 points, or 0.6%, to finish at 29,783.35, while the S&P 500 fell 17.38 points, or 0.5%, to 3,609.53. The tech-heavy Nasdaq Composite Index declined 24.79 points, or 0.2%, to end at 11,899.34.

The Dow on Monday advanced 470.63 points, or 1.6%, to close at 29,950.44, marking its first record finish since Feb. 12 and leaving it on the doorstep of the psychologically important 30,000 milestone. The S&P 500 rose 41.76 points, or 1.2%, to close at a record 3,626.91. The Nasdaq Composite rose 94.84 points, or 0.8%, to end at 11,924.13.

Stocks came under pressure Tuesday, with a report showing the weakest retail sales in months, driving markets down from their early records to start the week. Analysts were on the watch for signs that the U.S. consumer, resilient to the shocks from the coronavirus pandemic thus far, would start to buckle as federal unemployment benefits tapered.

Data showed that October retail sales rose 0.3% in October — matching the consensus forecast produced by a MarketWatch survey of economists, but confirming the weakest rise in six months.

“Waning momentum in consumer activity highlights the lingering fragility of individuals and households as local restrictions and safety protocols continue to affect incomes, revenues and opportunities,” said Lindsey Piegza, chief economist for Stifel.

Meanwhile, the U.S. saw 166,581 new Covid-19 cases on Monday, and at least 796 people died, according to a New York Times tracker. In the past week, the U.S. has averaged 155,442 cases a day, up 82% from the average two weeks ago and cases are rising in 50 states and territories.

The market’s pause reflects investor uncertainty over the near-term outlook as they attempt to balance the promise of a vaccine with rising cases, and shrinking economic activity in some parts of the economy.

A lack of progress toward additional economic aid out of Washington also was hampering a more robust move by markets, said Keith Buchanan, senior portfolio manager at Globalt, in an interview.

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Federal Reserve Chairman Jerome Powell said on Tuesday that the need for additional fiscal help from Washington was more pressing than it has been in a long time.

Stocks rose Monday after Moderna Inc. said its Covid-19 vaccine candidate was 94.5% effective in preventing infections during a late-stage trial. A week earlier, Pfizer Inc. and BioNTech SE announced their vaccine candidate was more than 90% effective.

Prospects for a vaccine prompted a rotation away from pandemic winners, including large-cap tech and internet stocks, in favor of more economically sensitive stocks.

That said, Buchanan argued that recent outperformance by cyclical stocks versus large-cap tech and other pandemic winners was unlikely to prove to be overdone. The gap between growth and value stocks had grown even more substantially stretched over the last eight months, he said.

But analysts said uncertainty about the consumer could undercut the rally, putting the focus on retail sales data and other measures of consumer activity.

Sluggish spending in October echoes the experience of retailers earlier this year during the first Covid-19 wave, said Jim Baird, chief investment officer for Plante Moran Financial Advisors.

“Surging coronavirus cases pose a clear risk, as social distancing measures are being reimposed across much of the country. Increased restrictions are likely to hinder consumer spending in the months ahead, particularly for bricks-and-mortar stores and restaurants that rely on in-person shopping an dining, respectively,” he said.

In other economic data, industrial production rose 1.1% in October, the Federal Reserve reported, in line with expectations. Capacity utilization rose to 72.8% from 72% in September.

Ultralow interest rates, helped the National Association of Home Builders’ monthly confidence index to rise five points to a record-high reading of 90 in November, the trade group said Tuesday.

The 10-year Treasury note yield fell 3.4 basis points to 0.872%. Bond prices move inversely to yields.

December gold futures declined by $2.70, or 0.1%, to settle at $1,885.10 an ounce on Comex. The U.S. crude benchmark  rose 0.2% to settle at $41.43 a barrel on the New York Mercantile Exchange.

The Stoxx Europe 600  closed 0.2% lower, while the U.K.’s FTSE 100 benchmark  ended the session off 1.1%.

In Asian stock trading, China’s CSI 300 closed 0.2% lower on Tuesday and Japan’s Nikkei finished 0.4% higher.

The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, was off 0.2%.

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