The Dow Fell 68 Points Because Stocks Needed a Breather

Stocks slipped a day after all three major U.S. indexes set records. Intel and health-care shares helped bolster the Dow and the S&P 500.

Stocks slipped Tuesday even after the fiscal stimulus bill potentially got bigger. If it weren’t for health-care stocks, the Dow’s loss would have been worse. It may have been time for a breather, as all three major U.S. stock indexes set records Monday.

The Dow Jones Industrial Average slid 68.30 points, or 0.23%, to close at 30,335.67. The S&P 500 fell 8.32 points, or 0.22%, to end at 3,727.04, and the Nasdaq Composite dropped 49.20 points, or 0.38%, to close at 12,850.22. The biggest gainer in the S&P 500 and the Dow was chip giant Intel (ticker: INTC), which saw shares surge 4.9%. Activist hedge fund investor Dan Loeb’s Third Point has accumulated a large stake in Intel and is pushing for ”immediate change.”

The overall weakness came even as the House passed a version of the fiscal stimulus bill that would include $2,000 direct payments to households, higher than the $600 in an earlier version of the bill. This would add even more cash to households, which have saved plenty and are potentially positioned to unleash pent-up demand when Covid-19 vaccines are widely distributed, catalyzing aggressive state reopenings.

Stocks have been on a tear in the fourth quarter, with the S&P 500 up 15% since Sept. 23, the start of a fresh rally in stocks, the back half of which is riding on more fiscal stimulus and the expectation of billions of vaccine doses distributed soon. The Dow is up 13% since that date and many on Wall Street have been looking for a pullback in stocks and aren’t surprised when stocks fall on a day in which economic developments were positive, like Tuesday.

As for the Dow, four of the eight stocks that rose were health-care stocks. UnitedHealth Group (UNH) tacked on 0.3%, Johnson & Johnson (JNJ) rose 0.64%, Amgen (AMGN) surged 1.4%, and Merck (MRK) gained 1.2%.

One positive: the Georgia run-off turned incrementally more in favor of the Republican Senators and the Jan. 5 decision date is approaching. Republican Senator David Perdue’s lead rose to a 0.4 percentage point differential Tuesday from 0.1 percentage point Monday, according to FiveThirtyEight. Republican Senator Kelly Loeffler’s deficit shrank from a differential of 0.5 percentage point Tuesday from negative 0.9 percentage point Monday. The Democrats need to win both seats to take control of the Senate. A split Congress—a Republican Senate and a Democratic House—could mean less-stringent regulation on health-care than if both were controlled by Democrats.

Health-care stocks on the S&P 500 are trading at a 27% valuation discount to the average S&P 500 stock on a forward price-to-earnings basis, according to a report by analysts at J.P. Morgan. The report notes that since 2000, health-care stocks have tended to trade in line with the S&P 500’s valuation. The analysts believe the Georgia run-off result could be a meaningful catalyst for health-care stocks.

Write to Jacob Sonenshine at