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US stocks retreat after big Monday rally

US stocks retreat after big Monday rally

The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City. REUTERS/Carlo Allegri/File Photo

NEW YORK: Wall Street stocks ended lower on Tuesday (May 19) as top US economic officials warned the US economy faces continued risks, causing the market to give back some of the gains from the prior session.

The Dow Jones Industrial Average finished down 390.51 points (1.59 per cent) at 24,206.86, pulling back from the 3.9 per cent surge on Monday.

The broad-based S&P 500 dropped 30.97 points (1.05 per cent) to 2,922.94, while the tech-rich Nasdaq Composite Index shed 49.72 points (0.54 per cent) to 9,185.11.

It is not unusual to see a pullback in stocks after a big rally, but a high-profile Capitol Hill hearing highlighted lingering concerns on how to safely revive the economy, analysts said.

US Treasury Secretary Steven Mnuchin warned the US economy risks suffering "permanent damage" the longer the lockdown to contain the COVID-19 pandemic drags on.

The White House has urged states to reopen their economies as quickly as is safely possible and has not embraced the need to approve additional fiscal support right now - a stance taken by congressional Democrats.

Federal Reserve Chair Jerome Powell has in recent days suggested that more will be needed to ease the unprecedented economic pain, but was careful during the hearing not to stray into recommending more spending - the purview of Congress.

FHN Financial's Chris Low said the partisan divide suggested there will not be a fast agreement to provide more funds to cash-strapped states, "an essential part of laying groundwork for a quick recovery," he said.

"You're not going to get that aid if the two parties can't work together," Low said.

The market also fell following an article in Stat News, which focuses on health and medicine, expressing skepticism over Monday's announcement by Moderna about favourable results on a phase 1 test for a coronavirus vaccine.

READ: Early data on Moderna's COVID-19 vaccine insufficient

Moderna's announcement, which was a major catalyst in Monday's rally, "revealed very little information" and no data about the vaccine, the report said.

In Tuesday's session, Southwest Airlines rose 2.2 per cent as it reported a "modest improvement" in demand in May after bookings more than offset cancellations for the first time since the COVID-19 crisis.

Retail giant Walmart finished 2.1 per cent lower after giving up early gains. The company reported higher profits on a surge in demand for groceries and other essential items, but said it suffered US$900 million in COVID-19 related expenses in the first quarter.

Kohl's slid 7.7 per cent as it reported a first-quarter loss of US$541 million due to a hit from coronavirus lockdowns that shuttered stores.

Source: AFP/de


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