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Wall Street Mixed at Open as China, Covid Fears Dominate; Dow Down 20 Pts

Published 26/07/2021, 15:12
Updated 26/07/2021, 15:12
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. stock markets retreated from all-time highs at the open on Monday, weighed on by fresh worries for the future of Chinese ADRs and by concern at the growing spread of Covid-19 in the U.S., and its possible impact on the economy. 

By 9:40 AM ET (1340 GMT), the Dow Jones Industrial Average was down 20 points, or less than 0.1%, at 35,041 points. The Nasdaq Composite was down in line while S&P 500 was up by less than 0.1%.

Earlier, newswires reported that Goldman Sachs (NYSE:GS) had cut its U.S. growth forecasts for the third and fourth quarters by 1 percentage point each, in part due to the renewed spread of Covid-19 weighing on the service sector. Separately, a survey by Deutsche Bank (DE:DBKGn) showed that over half of its clients expect some form of Covid-related restrictions to be back in place before the end of the year. 

The day's only major data release also surprised to the downside: new home sales fell for a third straight month in June, by 6.6%, to their lowest in 14 months.

The prospect of a slowing economy once again drew attention to the stretched valuations of U.S. markets after 16 months of extraordinary stimulus. Liz Ann Sonders, chief investment strategist at Charles Schwab (NYSE:SCHW), noted via Twitter that the forward price/sales ratio of the S&P is now higher than at the peak of the 2000 Internet bubble. 

The morning's biggest movers were, once again, largely Chinese ADRs, which tumbled after a multi-pronged attack on the country's tech sector over the weekend. The government confirmed leaks on Friday that it intends to force online education providers to turn into non-profits, while two separate regulators banned Tencent (HK:0700) Music from holding certain exclusive music rights and issued a sharply-worded reminder to food delivery companies of the need to pay at least the minimum wage. 

After earlier dealings, EdTech names New Oriental Education & Technology (NYSE:EDU) was down 24% while TAL Education (NYSE:TAL) was down 17% and Ke Holdings (NYSE:BEKE) was down 18%. Tencent Music  (NYSE:TME) stock meanwhile fell 5.1% and Meituan (OTC:MPNGY), the country's biggest food delivery service, fell 12% to a new all-time low.  Meituan is also backed by Tencent Holdings (OTC:TCEHY), which fell 7.8% to a 10-month low.

In the U.S., meanwhile, Aon (NYSE:AON) stock rose 6.5% and Willis Towers Watson (NASDAQ:WLTW) stock fell 5.9% after the two insurers called off their planned merger due to resistance from antitrust regulators at the Department of Justice, who feared the deal would limit choice and lead to higher prices. 

Among the biggest gainers was Coinbase Global (NASDAQ:COIN)l stock, which rose 8.0% after rumors of interest from Amazon (NASDAQ:AMZN) in cryptocurrency pushed the price of Bitcoin up by over 15% through the weekend. Hasbro (NASDAQ:HAS) stock rose 9.0% to its highest since the start of the pandemic after reporting strong quarterly numbers. However, the big earnings release of the day is from Tesla (NASDAQ:TSLA), which reports its numbers after the close. Tesla stock rose 1.0% in anticipation of a record quarterly profit. The company sold 206,000 cars in the second quarter, escaping the worst of the global chip shortage.

 

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