The Dow Fell 185 Points Points Because the Risks Are Looking Bigger

The S&P 500 index failed to rise Monday despite gains by big tech stocks and signs of progress toward a government-spending plan to limit the economic damage from the pandemic.

The Dow Jones Industrial Average fell 184.82 points, or 0.6% to close the day at 29,863, while the S&P 500 fell 15.97 points, or 0.4%, to close at 3,647. The Nasdaq Composite rose 62.17 points, or 0.5%, to end the day at 12,440. (AMZN), Microsoft (MSFT), and Netflix (NFLX), which have a combined market capitalization of $3.4 trillion, rose 1.3%, 0.4% and 3.8%, respectively. Even with these stocks up, and a 29% surge by Alexion Pharmaceuticals (ALXN), the S&P 500 could not eke out a gain.

Alexion agreed to be purchased by AstraZeneca (AZN) for $39 billion in a cash-and-stock deal that implies a premium of 46% over Alexion’s closing price on Friday. AstraZenca fell 7.8%.

Stocks got off to a positive start in the morning, after news emerged that Congress is making another push at completing a more than $908 billion stimulus bill. Investors had grown optimistic in November that a deal would get done soon, but stocks then took a breather, moving down as Democrats and Republicans in Congress have squabbled over details. Democrats wanted more state and local funding and Republicans wanted more protection for small business from legal claims over coronavirus infections.

While stocks appear to have priced in the positive fiscal-stimulus developments, though the S&P 500 had fallen for the few days leading into Monday, it is far from certain that a deal will go through. Dennis DeBusschere, Evercore’s head of portfolio strategy research, told Barron’s via email that “strong views coming from the sell side that a fiscal deal will not get done” are pressuring market sentiment.

Value stocks, which are more correlated to changes in the economy than growth stocks are, fell. The Vanguard S&P 500 Value Index Exchange-Traded Fund (VOOV) fell 1%.

Adding to the negative sentiment was news that OPEC cut its oil- demand forecast for 2021. The cartel said it previously expected oil demand to grow to 6.25 million barrels per day, but now expects the total to be 5.9 million. That is a negative indication about the general state of the economy.

Chevron (CVX) and Exxon Mobil (XOM) fell 3.3% and 3.6%, respectively.

Finally, the stock market has soared in recent months, partially because investors have high expectations for vaccines and fiscal stimulus. With valuations elevated as well, some investors are beginning to note that the risks to stocks are bigger than the potential gains.

“Market movements will be especially confusing into year-end given various event risks,” DeBusschere wrote in a note. “There is likely to be some broad based consolidation in the near term.”

One gloomy possibility, in addition to a delayed fiscal-stimulus bill, is that the billions of Covid-19 vaccine doses expected to be shipped in the next year could face trouble reaching the public. “Distribution could be an issue,” Michael Greenly, senior portfolio manager at UBS Private Wealth Management, told Barron’s.

The legendary investor Leon Cooperman told Barron’s he sees a potential 5% gain for the S&P 500 for the next year at 5%, with a possible 10% loss.

Write to Jacob Sonenshine at