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Late drop leaves S&P 500 lower, breaking a 7-day win streak

Alex Veiga and Damian J. Troise
Associated Press

A late slide in big technology companies left indexes broadly lower on Wall Street, erasing an early gain and breaking a seven-day winning streak for the S&P 500.

The benchmark index, which fell 0.8% Tuesday, remains within striking distance of the all-time high it reached in February.

Gains for banks and industrial companies were offset by drops in big-name tech stocks like Apple and Microsoft. Those stocks have far outpaced the rest of the market this year as investors bet they could still thrive in a stay-at-home economy. Treasury yields rose, a sign that pessimism about the economy is waning.

In this June 30, 2020 file photo, a woman wearing a mask passes a sign for Wall Street during the coronavirus pandemic.

The S&P 500 is coming off a seven-day winning streak. Investors have grown more confident amid some positive economic data and better-than-expected results from companies reporting their second-quarter results in recent weeks that suggest corporate profits could be headed higher in the second half of this year and in 2021. Traders are also increasingly optimistic that the many pharmaceutical companies working on ways to treat COVID-19 will deliver a working vaccine in coming months.

“What is a risk worth taking is the assumption that a vaccine will be made available around year-end, and that this vaccine will help eliminate the virus in the coming year,” said Sam Stovall, chief investment strategist at CFRA Research.

The Dow Jones Industrial Average was little changed at 27,809 in the last half-hour of trading. The Nasdaq composite slid 0.9%. The Russell 2000 index of small company stocks rose 0.3%.

European and Asian markets closed broadly higher. Treasury yields rose, another sign of rising optimism among investors. Oil prices fell.

Wall Street continues to notch gains even as the broader U.S. economy continues to struggle. While there have been some positive signs, including a jobs report on Friday that showed a larger-than-expected increase in hiring in July, the economy remains hobbled by high unemployment and an uneven reopening by businesses as the number of new confirmed coronavirus cases has increased in recent weeks. The outlook for an full economic recovery is clouded by worries that the resurgence in infections could force the economy to backtrack.

Unprecedented actions by the Federal Reserve to stabilize markets this spring, including lowering interest rates and ramping up bond purchases, have made stocks attractive relative to other assets and given traders enough confidence to keep snapping up stocks.

“Very low interest rates, which not only have been supporting the price of gold, they have been making (stocks) look even more attractive, since low interest rates increase the intrinsic value of stocks,” Stovall said.

The S&P 500 has roared almost all the way back from a nearly 34% tumble in March. The benchmark index is now within 0.6% of the record high it set in February, before the pandemic slammed the economy into recession.

Meanwhile, investors continue to keep an eye on Washington for a fresh lifeline for the U.S. economy. On Saturday, Trump issued executive orders to extend an expired benefit for unemployed workers, among other things, in response to a collapse of negotiations on Capitol Hill for another economic rescue bill. Critics said the moves did not go far enough to support the economy and questioned how they would work.

While talks between Democrats and Republicans on a new economic relief package appear to have stalled, investors are still optimistic both sides will reach an agreement.

“The markets do show that they believe something is going to get passed,” said Tom Martin, senior portfolio manager at Globalt Investments.

Traders also have been grappling with uncertainty over widening antagonisms between the United States and China, the world’s largest economies. The two sides are scheduled to hold virtual trade talks at the end of the week.

The yield on the 10-year Treasury rose to 0.66% from 0.57% late Monday, a big move.

Oil prices closed lower after being up earlier. Benchmark U.S. crude oil for September delivery fell 0.8% to settle at $41.61 per barrel. Brent crude oil for October delivery fell 1.1% to settle at $44.50 per barrel.