Declines Arrest Three-Session Rally, as Geopolitical Worry Trumps Good News About Economy
U.S. stock prices snapped a three-session winning streak on Thursday, falling as renewed tension on the Russia-Ukraine border damped enthusiasm for upbeat economic reports.
The Dow Jones Industrial Average fell 42.44 points, or 0.2%, to 17079.57, while the S&P 500 declined 3.38 points, or 0.2%, to 1996.74. Both indexes fell for the first time this week after a rally carried the S&P 500 over 2000 for the first time. The Nasdaq NDAQ +0.19%Composite dropped 11.93 points, or 0.3%, to 4557.69.
Fewer-than-average shares changed hands on Thursday, continuing a trend of quiet trading leading up to the Labor Day holiday weekend. Investors remain cautious about staking out large bets on additional market gains, traders said.
U.S. stocks ticked lower despite a better-than-expected reading on second-quarter gross domestic product, the broadest measure of economic growth. Thursday’s revised GDP reading showed a 4.2% growth rate from April to June, a higher rate of growth than the 4% initial reading, helping confirm a rebound from a dismal first quarter.
Separately, the number of Americans filing for unemployment claims fell slightly more than expected, and pending home sales in July topped economists’ expectations.
In the Markets
- U.S. Bonds | Gold | Oil
- Heard on the Street: Bond Yields Even Lower for Longer
- U.S. GDP Expands at 4.2%
- Ukraine Worry Hits European Shares | What Markets Think
- Morning MoneyBeat: Why Its OK to Trust a Quiet Market
Stocks had rallied in recent days, after Federal Reserve Chairwoman Janet Yellenlast week provided assurances the U.S. central bank would keep easy-money policies in place. The Fed’s orchestration of low interest rates has heightened the appeal of stocks compared with bonds. The S&P 500 has climbed 40% since the start of 2013.
Clifford Davis, managing director in equity derivatives at BNP Paribas in New York, noted a cautious tone in this week’s trading, even as stocks edged to new highs. He said he helped more clients set up protective options trades that benefit from market drops than those that profit from a continued rally.
“We’re drifting right around these record levels,” he said “People are feeling like there’s more room on the down side than on the up side.”
Larry Whistler, president and chief executive at Buffalo, N.Y.-based Nottingham Advisors, which oversees about $1 billion in mostly exchange-traded funds, has been gradually trimming his higher-conviction U.S. sector bets, including those on shares of health-care and oil-services companies.
For now, he prefers ETFs that hold large-cap stocks. “It’s hard to have a lot of high-conviction ideas right now,” Mr. Whistler. The stock market is “probably a little ahead of itself, but there aren’t many warning signs yet.”
Thursday’s price declines began in Europe after an escalation in the conflict between Ukraine and Russia. The Stoxx Europe 600 fell 0.7%, while Germany’s DAX sank 1.1%, its biggest one-day drop in nearly two weeks. Ukrainian officials accused Russia of invading the country, saying Russian forces seized a coastal town near the border. Russian officials denied their troops were in Ukraine.
European stocks were a popular destination for U.S. investors early this year, but some investors are rethinking their positions. Retaliatory financial sanctions between the West and Russia have helped to exacerbate economic weakness in euro-zone leaders including Germany.
Chris Bertelsen, chief investment officer at Global Financial Private Capital, which oversees $4 billion in Sarasota, Fla., said he has grown increasingly skeptical that Europe’s economy can support gains in its stock markets in the years ahead. He isn’t yet selling longtime holdings, such as auto maker Daimler AG DAI.XE -1.57% , but said he is avoiding new positions. “Europe is so difficult to get your hands on,” he said. “We think there is more opportunity in the U.S.”
Yields on benchmark U.S. 10-year Treasury notes fell to 2.334%, from 2.361% late on Wednesday. Gold futures prices rose 0.5% to settle at $1, 288.70 a troy ounce, while crude oil futures rose 0.7% to settle at $94.55 a barrel.
Williams-Sonoma WSM -11.96% stock fell 12% in price, after the high-end housewares retailer forecast third-quarter earnings that were lower than expected.Workday WDAY -4.88% fell 4.9% even after the business software company raised its full-year revenue forecast, with some analysts citing its above-average stock valuations.
Abercrombie & Fitch ANF -4.84% slumped 4.8% after sales for the teen retailer fell more than expected in the most recent quarter. Guess fell 8.8% after the retailer lowered its outlook for the year. Tilly’s dropped 4.3% after the teen retailer posted quarterly profit decline and weak sales at existing locations.