Wall Street drops as rally stalls, earnings disappoint

The Dow slumped again overnight, a sign that investors’ postelection optimism could be waning.

Donald Trump’s policy changes appear to have caught some investors on the hop.

The Dow Jones Industrial Average slumped again overnight, a sign that investors’ postelection optimism could be waning.

The stockmarket rally that catapulted the Dow industrials over 20,000 last week has stalled in recent sessions, with investors backing away from shares of financial and industrial companies while picking up havens like gold.

Some investors and analysts said President Donald Trump’s move to restrict immigration and the pushback it received had tempered risk appetite at the end of an otherwise strong month for stocks.

Earnings results also hurt shares of some big companies.

The blue-chip index fell 107 points, or 0.5 per cent, to 19,864. The S & P 500 lost 0.1 per cent, weighed down by declines in shares of industrial companies, and the Nasdaq Composite edged up less than 0.1 per cent.

Earlier, Europe’s major equity markets also fell, pulled down by Wall Street amid the fallout from Donald Trump’s immigration and trade policies. London, Paris and Frankfurt each lost around one per cent.

Paul Hatfield, global chief investment officer at Alcentra, said recent US policy changes had “caught people on the hop ... turning what was a pause for breath into a more defensive stance.”

Despite the week’s setbacks, major indexes remain on track to end the month higher, which would be their first January gains since 2013.

Shares of United Parcel Service shed 6.8 per cent after the company gave a downbeat outlook for its 2017 earnings and said lower margins in e-commerce deliveries hurt its bottom line. FedEx shares fell 2.1 per cent. Industrial companies in the S & P 500 fell 0.9 per cent and were among the worst performers in the broad index.

Shares of Under Armour fell 23 per cent after the athletic-gear maker posted an unexpected fall in quarterly profit and issued a disappointing sales forecast for 2017. Harley-Davidson shares fell 1.5 per cent after the company reported lower-than-expected earnings and revenue for the fourth quarter.

As investors retreated from stocks, haven assets gained.

Gold rose 1.3 per cent to $US1,208.60 an ounce, its second consecutive session of gains. The yield on the 10-year US Treasury note slipped to 2.451 per cent, according to Tradeweb, from 2.486 per cent yesterday. Yields fall as bond prices rise.

The Stoxx Europe 600 fell 0.7 per cent, posting a 0.4 per cent loss for the month.

The euro rose 0.9 per cent against the dollar to $US1.08. The move came after a Financial Times article, which said a trade adviser to Donald Trump said Germany was using a “grossly undervalued” euro to get an advantage over trading partners, including the US German Chancellor Angela Merkel rebutted the comments in a press conference.

The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, fell 0.8 per cent, deepening losses for the year.

Earlier, markets in Asia mostly followed Wall Street lower. Japan’s Nikkei Stock Average closed down 1.7 per cent Tuesday, posting a 0.4 per cent decline for the month — its worst monthly performance since September.

Dow Jones Newswires