U.S. stocks and index ETFs are attempting to recover after dropping on Tuesday due to a precipitous fall in drug store stocks and lackluster economic data.
The Dow Jones Industrial Average tumbled 177 points, or 0.6%, to give back most of Monday’s gains. Meanwhile, the S&P 500 slipped 0.4% and the Nasdaq Composite declined 0.2%.
Investors were also leery after data revealed that retail sales increased less than projected in October, climbing just 0.3% last month, as opposed to the 0.5% gain expected by economists polled by Dow Jones.
Tuesday’s decline comes just a day after the Dow and S&P 500 both notched new record closing highs, amid vaccine news from Moderna.
“We just reached new highs, so it’s natural for the market to take a breather, and the slightly disappointing read on the retail sales front is facilitating that,” said Chris Larkin, managing director of trading and investment product at E-Trade. “Without stimulus checks coming in, there’s a bit of uncertainty in this sector in the short term.”
On Monday, the benchmark indexes closed at record levels after Moderna released trial data illustrating that its coronavirus vaccine was over 94% effective, following similar news from Pfizer last week. The news has analysts cautiously optimistic that stocks will continue to rally.
“We saw such a positive reaction last week which then petered out as investors started to take account of all of those various question marks that still remain,” Seema Shah, Principal Global Investors’ chief strategist, told Yahoo Finance on Monday. “We’ll need to see a continuation of this kind of good news to keep this rotation going.”
“But I think that even if we take account of all the various question marks that are out there, next year still looks pretty strong,” she added. “Not only do we have a potential vaccine in play, but we also have all the central banks providing endless liquidity. We have fiscal stimulus on the cards and of course we have an economic recovery which either is going to be ongoing. So I think as investors look at this, there are a lot of reasons to have a pro-cyclical trade on. It’s just a question of maybe maintaining some caution as you move into that.”
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