Why Is the Stock Market Down Today? China, Oil in Focus. – Barron’s

Crude prices hit multiyear highs after OPEC+ talks failed to reach an agreement.

Spencer Platt/Getty Images

Stocks closed down Tuesday as investors digested weaker-than-expected data on the services sector as well as volatile oil prices and China’s regulatory attack on U.S.-listed Chinese companies.

The Dow Jones Industrial Average  fell 209 points, or 0.6% while the S&P 500 fell 0.2%, and the  Nasdaq Composite  gained 0.2%.

Oil prices pulled back from earlier gains after the OPEC+ meeting collapsed without a deal. Oil had been up more than 1% early Tuesday with the price of oil topping $77 a barrel but was down more than 1.9% in afternoon trading as the broader market fell.

In Asia, Tokyo’s Nikkei 225 rose 0.2%, while Hong Kong’s Hang Seng declined 0.25%. The Shanghai Composite dipped 0.1%. The FTSE 100 in London was down 0.8% as the pan-European Stoxx 600 slid 0.5%. The CAC 40 in Paris declined 0.9% and Frankfurt’s DAX fell 1%.

Stocks had been slightly lower at the open but fell further after the Institute for Supply Management showed that service sector activity was 60.1% in June, down from 64.0% in May and below consensus estimates of 63.5%. The drop in activity was due to restaurants and retailers having difficulty finding workers as well as supply chain disruptions.

Crude prices were also in focus after the OPEC+ group of oil-producing countries postponed a decision on whether to increase output. International benchmark Brent was trading at $74.88 a barrel while West Texas Intermediate was near $73.76. Prices spiked near six-year highs, then dropped.

Energy names were some of the weakest performers on the S&P 500 with Diamondback Energy (FANG) down 6.9% and Halliburton (HAL) off by 6.4%.

“Combined with the rising oil demand driven by easing travel restrictions, the impasse in discussions and inability to find an agreement on increasing supply will provide further support to oil prices to the clear benefit of oil producing nations,” said Jamie Maddock, an analyst at Quilter Cheviot. 

“Crucially, it could also provide a challenge to the consensus view that global inflation is simply transitory,” Maddock added. “But for the time being, the oil majors are reaping the benefits, enabling rapid debt paydown and comfortably funding old and new energy investment.”  

Shares in Alstom fell 8.4%, as the French train and railway manufacturing group updated investors in a capital markets day. The company said the financial year 2021-22 will be a transition period as it stabilizes after acquiring Bombardier Transportation.

Shares of Chinese ride-sharing firm  Didi  (ticker: DIDI) have tumbled 18.9% after it was removed from app stores in China over data security concerns.  Full Truck Alliance  (YMM) has slumped 6.4%, and Kanzhun (BZ) has dropped 15.9% after their apps were also deleted. Perhaps not unrelated,  Weibo  (WB) has jumped 6.3% on reports it’s planning to go private.

Pfizer  (PFE) has fallen 1.2% on reports that its vaccine has lost some of its effectiveness in Israel.

Virgin Galactic  (SPCE) gained 3% despite getting downgraded to Neutral from Buy at UBS.

American Express  (AXP) gained 0.9% after getting upgraded to Buy from Neutral at Goldman Sachs.

Ingersoll Rand  (IR) fell 0.6% after getting upgraded to Buy from Neutral at Goldman Sachs.

Hologic  (HOLX) has risen 1.9% after getting upgraded to Outperform from In Line at Evercore ISI.

Write to Ben Levisohn at ben.levisohn@barrons.com

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