Dow Ends Lower as Bulls Take Profit on Signs of Consumer Stumble

By Yasin Ebrahim

The Dow closed lower Tuesday as signs the consumer is in fragile shape during the crucial holiday period weighed on sentiment and overshadowed the approval of the $900 billion stimulus package on Capitol Hill.

The Dow Jones Industrial Average fell 0.67%, or 200 points. The S&P 500 was down 0.21%, while the Nasdaq Composite rose 0.51%.

The Conference board’s consumer confidence gauge fell to 88.6 in December from 92.9 in September, missing economists’ forecast for a reading of 97.

“Confidence overall is likely to get worse before it gets better, but another round of stimulus should help to soften the blow a little bit, bridging the gap to the post-vaccine world,” Jefferies (NYSE:JEF) said in a note.

U.S. lawmakers passed a $900 billion stimulus bill that will include direct payments to Americans and small businesses, with about $8 billion of aid in support of the vaccine distribution.

President-elect Joe Biden touted further stimulus to come in the new year.  “Congress did its job this week,” Biden said. “I can and I must ask them to do it again next year,” he added. 

Optimism over the successful passage of a stimulus bill was growing in recent weeks, helping markets extend their gains into overbought territory, raising the prospect of profit taking.  

“Overall, U.S. equities in general are currently overbought / extended on the charts- and so we remain on guard for profit-taking / consolidation heading into Q1,” Janney said in a note.  

Sentiment on risk was also soured by ongoing concerns a mutant strain of Covid-19 identified in the U.K. could already be in the U.S., raising fears over fresh restrictions and sending travel-related stocks lower.

“Given the small fraction of US infections that have been sequenced, the variant could already be in the United States without having been detected,” The Centers for Disease Control said Tuesday.

Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL) and United Airlines Holdings (NASDAQ:UAL) were down more than 2%.  

In technology, Apple (NASDAQ:AAPL) was one of the biggest gainers on the day as investors continued to digest reports the company is considering an entry into the electric vehicle market as soon as 2024. A potential Apple car would also include battery technology, offering competition to runaway leader Tesla (NASDAQ:TSLA). 

In other news, Peloton Interactive (NASDAQ:PTON) surged 12% after the exercise bike maker landed a $420 million deal to buy equipment manufacturer Precor in a bid to boost its U.S. manufacturing presence after supply delays.

Walmart (NYSE:WMT) fell more than 1% after the U.S. Justice Department sued the retailer for allegedly fueling the opioid crisis in the U.S., according to a court filing.