By Geoffrey Smith
Investing.com -- U.S. stock markets opened markedly lower on Tuesday after a weak report for July retail sales cast fresh doubt on the momentum of an economy under increasing pressure from the latest wave of the pandemic.
Retail sales fell 1.1% in July, while core retail sales fell 0.4%, both figures undershooting expectations. The damage to sentiment was only partly offset by industrial production rising slightly more than expected in the month.
By 9:40 AM ET (1340 GMT), the Dow Jones Industrial Average was down 271 points or 0.8% at 35,354 points, retreating from the all-time high close it posted on Monday. The S&P 500 followed suit, falling 0.7%, while the Nasdaq Composite underperformed with a 0.8% drop, amid fresh falls in some big Chinese Internet stocks after Beijing regulators unveiled tough new draft rules aimed at restricting their market power.
"The resurgence in Covid and anxiety over inflation’s impact on spending power has certainly hurt sentiment, but the re-opening, a rebalancing of priorities from goods to services and rising household incomes still means broader spending can continue to grow," said ING chief international economist James Knightley in a note to clients. He noted that the number was "not a disaster", given that the actual decline in sales was concentrated in autos, and that most of the rest was accounted for by spending shifting into services, outside the scope of the report.
Knightley noted that retail sales account for only 40% to 45% of total consumer spending and are still 17% above pre-pandemic levels.
That was small comfort to Walmart (NYSE:WMT) stock and Home Depot (NYSE:HD) stock, both of which fell after quarterly updates that showed a sharp slowdown in sales growth at the retailers.
Tesla (NASDAQ:TSLA) stock continued to give up ground after national traffic safety regulators launched an investigation into its Autopilot software on Monday. The stock fell 2.1%, also hurt by news that the hedge fund of Michael Burry, made famous by 'The Big Short" had shorted both it and the ARK Innovation ETF run by tech investor Cathie Wood.
General Motors (NYSE:GM) stock also fell 2.5% after Berkshire Hathaway (NYSE:BRKa)'s 13F revealed it had cut its stake in the company. The sharp drop in July auto sales didn't help, also pulling Ford(NYSE:F) stock down 2.5%.
There was fresh pressure on some big-name Chinese ADRs after China's State Administration for Market Regulation published a draft of new laws aimed at limiting the ability of the big platform companies to create closed-circuit ecosystems on the web. It's the latest evidence of a broad government clampdown to curb the market power of such companies. Alibaba (NYSE:BABA) ADRs fell 3.3%, while Tencent Holdings ADRs (OTC:TCEHY) fell 3.1% and JD.com (NASDAQ:JD) ADRs fell 3.9%. Sentiment toward Chinese ADRs in general remained hurt by comments on Monday from Securities and Exchanges Commission head Gary Gensler, who called for a ban on groups listing in the U.S. through the ADRs of shell companies.
Elsewhere, Roblox stock fell 5.1% after the social gaming company's billings missed expectations, but Moderna (NASDAQ:MRNA) stock rose 2.5% and BioNTech (NASDAQ:BNTX) stock rose 0.4% after reports suggesting that the Biden administration will likely back 'booster shots' for those already vaccinated against Covid-19. Early results from a study presented on Monday by BioNTech and its partner Pfizer (NYSE:PFE) indicate that a booster shot substantially strengthens the immune system against the disease.