U.S. retail sales fell 1.1% month over month for July, worse than the estimated 0.3% drop.
Joe Raedle/Getty ImagesStocks fell on Tuesday, as concerns about the Covid-19 Delta variant continue to rise. A disappointing U.S. retail sales result didn’t help markets either.
The Dow Jones Industrial Average dropped 282 points, or 0.8%, while the S&P 500 fell 0.7% and the Nasdaq Composite declined 0.9%.
Markets were concerned about the Delta strain, which is disrupting both global demand and supply chains. In New Zealand, the government announced a three-day lockdown after one new case was discovered. In China, shipping continued to get backed up after a Covid case was reported at one of its ports. And in the U.S., it’s become accepted that booster shots will be needed as Florida, Louisiana, Hawaii, Oregon, and Mississippi set Covid case records.
“[The] Delta variant continues to plague markets,” writes NatAlliance Securities’ Andrew Brenner.
Elsewhere, U.S. retail sales fell 1.1% month-over-month for July, worse than the estimated 0.3% drop, raising concerns that the U.S. consumer may be starting to retrench. To be sure, sales still grew 16% year-over-year, but they decelerated from June’s results, according to Morgan Stanley economists.
Overall, There is “a little more concern about changing [consumer] behavior in the U.S.” says James Ragan, director of wealth management research at D.A. Davidson. “The economy is running at a slower rate than it was a few weeks ago.”
Metals and mining stocks got hit particularly hard. The SPDR S&P Metals & Mining exchange-traded fund (XME) fell 2.75%. The price of copper also fell 2.5%.
If the spread of the Delta variant proves temporary, this could be a buying opportunity for investors. “The recent resurgence of Covid, due to the delta variant, is impacting consumer confidence and spending temporarily, but once we get through this new surge in new cases, we should resume our prior path of economic growth and, if we do, then the stock market will respond accordingly,” writes Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
Chinese technology stocks marked declines in Hong Kong trading on Tuesday, after China’s market regulator said it would tighten rules on competition and data, adding a new wave of pressure to a sector that has already found itself under intense scrutiny.
In Asia, Hong Kong’s Hang Seng declined 1.7% while the Shanghai Composite fell 2% and Tokyo’s Nikkei 225 dipped 0.4%. The FTSE 100 in London was 0.4% higher as the pan-European Stoxx 600 added 0.1%. The CAC 40 in Paris moved 0.3% into the red and Frankfurt’s DAX was little changed.
China’s State Administration for Market Regulation on Tuesday issued a set of draft rules that would ban unfair competition and restrict companies’ handling of critical user data. The move marks just the latest pressure for the country’s embattled tech sector, which has found itself under intense scrutiny amid a wider market crackdown in the last month that has also touched education, healthcare, property, and financials.
New regulatory scrutiny adds on to China-linked market concerns this week. China’s economy slowed faster than expected in July, data showed, with extreme weather and the spread of the more contagious Delta variant of coronavirus playing a role. That hurt Chinese stocks on Monday.
“Some well-received corporate results helped balance out wider downbeat sentiment linked to the signs of a Chinese slowdown which emerged at the beginning of the week and the turmoil in Afghanistan,” said Russ Mould, an analyst at broker AJ Bell, comparing Asian woes with the relative outperformance of European stocks on Tuesday.
Tesla (ticker: TSLA) stock fell 3% after CEO Li Xiang of electric vehicle maker Li Auto (LI), said the industry should limit using terms of autonomous driving. Li stock rose 1.5%.
Walmart (WMT) stock was essentially flat after reporting a profit of $1.78 a share, beating estimates of $1.57 a share, on sales of $141 billion, above expectations for $137 billion.
Sea Ltd. (SE) stock rose 6.1% after reporting a loss of 61 cents a share, worse than estimates of a 49 cent loss, on sales of $2.3 billion, above expectations for $2 billion.
Applovin (APP) stock rose 12% after getting upgraded to Equal Weight from Underweight at Morgan Stanley.
Alibaba (BABA) has dropped 4.9% after Chinese regulators said that they will continue to target competition and data safety.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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Why Is the Stock Market Sliding Today? Covid Fears, Retail Sales. - Barron's
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