Stocks continue slipping a day after worst loss in weeks

Morning After

NEW YORK (AP) — U.S. stocks are falling Tuesday, as momentum slows following Wall Street’s worst day in a month on worries about rising virus counts and Washington’s inability to deliver more aid to the economy.

The S&P 500 fell 0.2% in afternoon trading after earlier swinging between small gains and losses. Most of the stocks in the index were lower, particularly oil producers and other companies whose profits tend to track the strength of the economy. Counterbalancing them were technology stocks, which rose after AMD said it would buy fellow chipmaker Xilinx for $35 billion.

The parade of companies reporting better profits than expected for the last quarter also continued to grow, helping to steady the market somewhat. Merck, Invesco and Laboratory Corp. of America were among the roughly two dozen companies in the S&P 500 reporting earnings for the summer that topped analysts’ expectations on Tuesday morning.

The Dow Jones Industrial Average was down 152 points, or 0.6%, at 27,533 as of 12:52 p.m. Eastern time, and the Nasdaq composite was 0.5% higher.

Caution continues to hang over markets. Coronavirus counts keep climbing at a troubling rate across much of the United States and Europe. The worry is that could lead to the return of lockdowns in hopes of slowing the pandemic’s spread, which could further choke off the improvements the economy showed during the summer.

The U.S. economy’s momentum has already slowed following the expiration of supplemental benefits for laid-off workers and other support that Congress approved for the economy earlier this year.

Reports on the economy released Tuesday were mixed. Orders for big-ticket manufactured goods rose 1.9% in September, an acceleration from August’s 0.4% growth and better than economists expected but well below July’s 11.8%. Consumer confidence also weakened a bit in October, when economists were expecting it to hold steady.

“The market was really set up for any sort of a negative surprise that could potentially impact it,” said Scott Knapp, chief market strategist at CUNA Mutual Group.

Investors have been clamoring for Congress to deliver another round of stimulus for the economy, but they’re increasingly acknowledging it won’t happen anytime soon.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued their negotiations on a deal Monday afternoon, and a Pelosi spokesman said she’s optimistic an agreement can happen before Election Day next week. But even if a deal is reached, it could wither in the face of resistance from Republicans controlling the Senate. After confirming the latest Supreme Court justice, the Senate is unlikely to return to session until Nov. 9.

The market’s caution is also apparent in how it’s reacting to corporate profit reports. Through the first two weeks of earnings season, companies that reported better results than expected have not been getting the typical pop in their stock price the day after.

“Companies that are beating expectations are not being rewarded to the degree that companies that miss expectations are being punished,” Knapp said. “That’s going to be the case when you have valuations this high.”

F5 Networks rose 6.4% for one of the best gains in the S&P 500 after it reported better earnings than expected. But 3M fell 1.7% despite likewise reporting stronger results than forecast.

Caterpillar also fell 3.7% after reporting stronger earnings than expected, while Eli Lilly slumped 5.6% after its profit report fell short of Wall Street’s forecast.

This is the busiest week of earnings reporting season, and Microsoft is the next big company on the schedule after trading ends Tuesday.

Xilinx jumped 7.6% for the biggest gain in the S&P 500 following the announcement of its all-stock acquisition by AMD.

In another sign of increased caution, Treasury yields retrenched again. The yield on the 10-year Treasury dipped to 0.78% from 0.81% late Monday.

In European stock markets, France’s CAC 40 fell 1.8%, and Germany’s DAX lost 0.9%. The FTSE 100 in London dropped 1.1%.

In Asia, Japan’s Nikkei 225 was close to flat, while South Korea’s Kospi lost 0.6% and Hong Kong’s Hang Seng slipped 0.5%. Stocks in Shanghai inched up 0.1%.

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