By Anna Isaac and Alexander Osipovich
A rally in U.S. stocks fizzled Monday after California rolled
back its reopening plans, spurring worries about another
coronavirus lockdown.
Major stock indexes had surged earlier in the session, with the
Dow Jones Industrial Average rising more as much as 563 points. But
sentiment shifted after California moved to close all indoor
dining, bars and other businesses. The Los Angeles Unified School
District, the nation's second largest, said it would start the
school year online.
The Dow still eked out a gain of 10.50 points, or less than
0.1%, to close at 26085.80.
The S&P 500 fell 29.82 points, or 0.9%, to 3155.22. The
index briefly turned positive for the year during the session,
before stocks revered course. The technology-heavy Nasdaq
Composite, which had been trading at record highs in recent days,
dropped 226.60 points, or 2.1%, to 10390.84.
Markets have remained resilient in recent weeks despite rising
coronavirus infections in many U.S. states. The Dow and S&P 500
have surged more than 40% since late March, though they remain down
nearly 12% and 7% from their February records, respectively.
"The markets are looking out six months from now, and saying
that things will be a whole lot better by then," said Randy
Frederick, vice president of trading and derivatives at Charles
Schwab. He cautioned that uncertainty about the pandemic or the
upcoming U.S. election could still sour the market's rally in the
coming months.
Pfizer shares added $1.38, or 4.1%, to $35.21, lifting the Dow.
The pharmaceuticals giant and German biotech company BioNTech said
Monday that they received "fast track" designation from the Food
and Drug Administrations for two coronavirus vaccine candidates
that they are partnering on, allowing them to speed up testing.
Shares of Goldman Sachs, another Dow constituent, climbed $3.32,
or 1.6%, to $208.88 ahead of its earnings release later this
week.
Tesla went on another wild ride. Shares of the electric-car
maker surged 16% at one point Monday before shifting gears to fall
$47.59, or 3.1%, to $1497.06, their biggest reversal into negative
territory in more than 10 years. They have still more than tripled
in value this year.
Investors were looking ahead to second-quarter earnings season
for any signals about the shape and pace of economic recovery
following the disruption caused by the pandemic.
Economists generally agree that the quarter ended in June was
likely the worst of the downturn, but the extent of the damage is
still unclear. The rise in U.S. coronavirus cases has prompted
renewed restrictions on business and social gatherings in some
areas and threatens to slow down the economy's revival.
Earnings for S&P 500 companies are expected to have declined
nearly 45% from the second quarter of 2019, which would mark the
steepest year-over-year drop since 2008, according to FactSet.
"There's some optimism about the tone of the upcoming earnings,"
said Jane Foley, senior foreign exchange strategist at Rabobank.
"People have written off the second quarter, but they have high
expectations for the third quarter."
Shares of PepsiCo rose 45 cents, or 0.3%, to $134.91 as the food
and beverage giant posted better-than-expected revenue for the
latest quarter. The company said snacks sales rose as Covid-19
shelter-in-place measures and closures eased during the period.
"The environment has remained volatile and much uncertainty
remains about the duration and long-term implications of the
pandemic," Pepsi Chief Executive Ramon Laguarta said.
Earnings from big banks, including JPMorgan Chase and Wells
Fargo, and Netflix are on tap for later in the week.
Total U.S. coronavirus cases topped 3.3 million on Monday and
the nation's death toll exceeded 135,000, according to data
compiled by Johns Hopkins University. Thirty-two states had
increases of at least 10% in cases over the past week, prompting
public-health experts to warn it may become difficult to halt the
spread.
"The rising numbers of cases in the U.S. are just not generating
as much fear as they had before," said Seema Shah, chief strategist
at Principal Global Investors. "The death rates aren't rising as
quickly as infection rates. It suggests that the virus is being
managed better than before or it's more focused on the younger
generation, suggesting a less severe economic reaction."
Seven of the S&P 500's 11 sectors were in negative territory
on Monday, with consumer-discretionary, communications, real estate
and technology stocks among the worst performers.
Shares of Olive Garden owner Darden Restaurants, which has been
hurt this year by coronavirus-related cafe closures, gained 81
cents, or 1.1%, to $72.90 after it was upgraded by analysts at
JPMorgan.
Shares of chip maker Maxim Integrated jumped $5.20, or 8.1%, to
$69.29 after Analog Devices said it would buy its rival in an
all-stock transaction. The deal values the combined companies at
more than $68 billion, according to their own valuations. Analog
was down $7.25 a share, or 5.8%, to $117.25.
Overseas, the pan-continental Stoxx Europe 600 rose 1%. Most
major Asian markets ended the day sharply higher, with the Shanghai
Composite Index rising 1.8%.
The Shanghai index has climbed nearly 13% this year, making it
one of the world's best-performing major indexes. Growing
conviction that China's economy is recovering from the coronavirus
has encouraged investment in Chinese stocks from foreign
institutions and the millions of individual investors who dominate
trading in China.
Vincent Wen, an investment manager at KCG Securities Asia, said
the recent Chinese rally has been too fast, driven by official
messages and the prospect of easy monetary policy.
"Fundamentally speaking, the real economy remains weak and the
path to recovery will be bumpy," Mr. Wen said.
The yield on the 10-year U.S. Treasury ticked up to 0.638%, from
0.633% on Friday, as investors sold government bonds. Yields move
in the opposite direction from prices.
Joanne Chiu contributed to this article.
Write to Anna Isaac at anna.isaac@wsj.com and Alexander
Osipovich at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
July 13, 2020 17:02 ET (21:02 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.