Monday trading session in review.
All of the major U.S. stock market indexes closed lower Monday, to kick off the second quarter with disappointing vehicle sales and uninspiring economic data intensified concerns that soaring equity valuations won’t be reinforced by commensurately strong corporate quarterly results in coming weeks.
The Dow Jones Industrial Average DJIA, which fell more than 100 points earlier, finished down 13.01 points, or less than 0.1%, at 20,650.21, weighed down by shares of DuPont DD, American Express Co. AXP, and Cisco Systems Inc. CSCO.
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The S&P 500 index SPX, fell 5.01 points, or 0.2%, to close at 2,357.71, with seven out of 11 sectors finishing in the red, led lower by the consumer-discretionary, materials and technology stocks.
Both the Dow and the S&P 500 had been in danger of finishing below their 50-day moving averages for the first time since the November election, a sign that upbeat sentiment, underpinned by bullish hopes that President Donald Trump’s market-friendly policy proposals would be written into law soon, is fading.
The first quarter, which ended last week, finished with solid gains, with major indexes scoring advances of 4.6% to 9.8%. That rally has taken Wall Street to repeated records, but the scale of the move has some analysts concerned about equity valuations.
Mixed auto sales weighed on sentiment, said Peter Boockvar, chief market analyst at The Lindsey Group. The auto industry is seen as a major driver for the economy, and when coupled with concerns about when Trump’s tax policy will materialize, that is going to put pressure on the broader market, he said.
“Weak car sales are raising the question of economic growth and that’s flattening the yield curve and affecting financials,” said Boockvar. Financial stocks, which had earlier in the session been one of the worst performing sectors on the S&P 500, finished the day down 0.3%.
The yield on the 10-year Treasury note TMUBMUSD10Y, fell 5 basis points to 2.335% on Monday. Over the first quarter, the yield curve became flatter, meaning the difference of rates between short-term bonds and long-term bonds narrowed, signaling concern over the economic outlook.
Economic data, which showed some signs of softness Monday, added to the market’s cautious tone. The U.S. Markit manufacturing purchasing manager’s index fell to 53.3 in March from 54.2 the previous month, while a reading of manufacturing from the Institute for Supply Management for March fell to 57.2 from 57.7, though the employment index hit a six-year high. A reading of 50 indicates economic expansion.
“I expect we’ll see some softness until earnings start to come in,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services. “Right now we’re positioning for earnings to be strong, particularly in the tech, financial and health-care sectors, but there is a broad concern about valuation.”
“We’re leaving a time when you can just buy the broad market,” Kaufman said. “I think indexers will be OK going forward, but there will be greater opportunities for stock pickers or people who go after specific areas of the market.”
Data and Fed speakers: Despite Monday’s data, Friday’s jobs numbers will likely be the biggest focus before companies begin reporting earnings in the middle of the month. Some are concerned that the strong start to U.S. employment growth in the first two months of 2017 will be difficult to maintain.
Among Federal Reserve speakers, Philadelphia Fed President Patrick Harker reiterated on Monday that he still backs two more rate hikes this year. Richmond Fed President Jeffrey Lacker is scheduled to speak on the Wall Street concept of “too big to fail” at Washington & Lee University in Lexington, Va., at 5 p.m. Eastern.
Stocks to watch: Shares of Tesla Inc. TSLA, closed up 7.3% after the electric-car maker beat expectations with 25,000 deliveries in the first quarter.
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Ford Motor Co. F, fell 1.7% after its March sales data, while General Motors Co. GM, lost 3.4%. With the day’s move, Tesla surpassed Ford in market capitalization for the first time in its history — $48.69 billion to $45.47 billion.
Auto-related stocks took a pounding, with shares of O’Reilly Automotive Inc. ORLY, BorgWarner Inc. BWA, and CarMax Inc. KMX, all finishing down more than 3%.
Panera Bread Co. PNRA, shares jumped to a record on reports of a possible sale. Shares closed up 7.9%.
DryShips Inc. DRYS, finished down nearly 19% after the operator of cargo ships announced a private offering of up to $226.4 million worth of its shares, and a deal to buy six vessels.
Other markets: Asian markets ADOW, +0.40% finished modestly higher Monday, while the Europe Stoxx 600 index SXXP, -0.49% SXXP, -0.49% declined 0.5%. The FTSE 100 index UKX, -0.55% also kicked off the second quarter on a subdued note.
The ICE Dollar Index DXY, which measures the value of the U.S. dollar relative to a basket of foreign currencies, traded up 0.2% to 100.54. Oil prices CLM7, declined 0.7% to settle at $50.24 a barrel and gold prices GCM7, +0.30% settled up 0.2% at $1,254 an ounce.
—Barbara Kollmeyer in Madrid contributed to this article.