The big bump Wall Street got from last week’s presidential election and cut to interest rates keeps fading, and U.S. stocks are falling again Friday as they head for a losing week.
The S&P 500 fell 1% in morning trading and was heading for its worst loss since before Election Day. The Dow Jones Industrial Average was down 306 points, or 0.7%, as of 10:10 a.m. Eastern time, and the Nasdaq composite was 1.7% lower.
Makers of vaccines helped drag the market lower after President-elect Donald Trump said he wants Robert F. Kennedy Jr., a prominent anti-vaccine activist, to be his Secretary of Health and Human Services. Moderna sank 6%, Pfizer fell 4.3% and Novavax dropped 2.1% amid concerns about a possible hit to profits.
The only stock to fall more in the S&P 500 was Applied Materials, which dropped 6.8% even though it reported a stronger profit for the latest quarter than analysts expected. The provider of manufacturing equipment and services to the semiconductor and other industries gave a forecast for revenue through early next year whose midpoint was just shy of analysts’ expectations.
The pressure is on companies to deliver big growth, in part because their stock prices have been rising so much faster than their earnings. That’s made the broad stock market look more expensive by a range of measures, which has critics calling for at least a fade. The S&P 500 is still up almost 24% for the year and near its all-time high set a few days ago, despite this week’s weakness.
In the bond market, yields were mixed following some stronger-than-expected reports on the economy.
One showed shoppers spent more at U.S. retailers last month than expected, another signal that the most influential force on the economy remains solid.
“Many consumers were reporting that they were putting off trips and big ticket item purchases until after the election,” according to Brian Jacobsen, chief economist at Annex Wealth Management. “Many businesses reported they were putting off capital investment due to the election. Now that the uncertainty of the outcome is behind us, we could see some decent ‘relief spending.’”
Friday’s data on retail sales, though, may not be quite as strong as it appeared. After taking away purchases of automobiles, sales at retailers were weaker last month than economists expected.
A separate report, meanwhile, showed manufacturing activity in New York state is growing strongly. That soundly beat expectations for zero growth, and it comes off October’s contraction.
Some of the survey’s responses were collected after Election Day last week, when Trump’s victory sent a jolt through financial markets around the world. Starting the day after Election Day, investors sent up stocks of banks, smaller U.S. companies and cryptocurrencies in particular as they laid bets on what Trump’s preference for higher tariffs, lower tax rates and lighter regulation would mean for the economy.
But investors are also taking into account some of the potential downsides from Trump’s return to the White House.
Besides Friday’s hit to vaccine makers, Treasury yields have been climbing in the bond market on both the economy’s surprising resilience and worries that Trump’s policies could spur bigger U.S. government deficits and faster inflation.
Such worries have forced traders to recalibrate how much relief the Fed could provide the economy next year through cuts to interest rates. The Fed earlier this month lowered its main interest rate for the second time this year, and past forecasts published by Fed officials had indicated more cuts were likely to come through 2025.
Lower interest rates can act as fuel for the stock market, but they can also put upward pressure on inflation.
On Thursday, Fed Chair Jerome Powell suggested the U.S. central bank needs to be cautious about future decisions on interst rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” he said, though he declined to discuss how Trump’s policies could alter things.
Traders have since ratcheted back expectations for the Fed to cut rates again at its meeting next month, though they still see better than a coin flip’s chance of it, according to data from CME Group.
In the bond market, the 10-year Treasury yield rose to 4.47% from 4.44% late Thursday. The two-year yield, which more closely tracks expectations for Fed action, slipped to 4.34% from 4.36% late Thursday.
In stock markets abroad, London’s FTSE 100 was close to flat after data from the Office for National Statistics showed economic growth slowed to 0.1% in the July-September quarter from the 0.5% in the previous quarter. It was weaker than expected.
Tokyo’s Nikkei 225 gained 0.3% after data showed growth for Japan’s economy accelerated in the latest quarter, even as the Bank of Japan raised interest rates in July.
AP Writers Matt Ott and Zimo Zhong contributed.
