Dow Industrials, S&P 500 Open Lower

By Anna Isaac and Xie Yu 

Stocks slipped Tuesday as investors parsed policy makers' pledges to take steps to bolster economic growth after the coronavirus outbreak curtailed business activity and travel.

The Dow Jones Industrial Average edged down 0.2% after falling in premarket futures trading. The S&P 500 fell less 0.3% in early New York trading, while the tech-heavy Nasdaq Composite Index was down 0.2%.

Earlier, the Stoxx Europe 600 gauge pared advances to 2%. China's Shanghai Composite earlier closed 0.7% higher.

Investors had a mixed reaction to a statement issued by finance ministers and central bankers from the Group of Seven countries vowing to put in place measures to contain the economic fallout of the coronavirus outbreak. The promises buoyed market sentiment while falling short of the more specific and detailed coordinated policy response that markets had sought.

"People will want to see something firm underneath the language," said Gregory Perdon, co-chief investment officer at Arbuthnot Latham investment management. "The proof is in the pudding, put some numbers on the table."

Hopes for a wave of stimulus on Monday drove the Dow up 5.1%, its biggest gain in more than a decade. G-7 central banks will continue to fulfill their mandates, including promoting price stability and economic growth "while maintaining the resilience of the financial system," according to the statement issued Tuesday.

"This talk of concerted and coordinated action from central banks has had a reaction, but what form that takes, time will tell," said Russ Mould, investment director at AJ Bell. "The coronavirus has hit at a time of high greed and little fear, a period of lofty and complacent levels of valuation. Cutting interest rates is not going to make someone take a flight to Italy if they're too scared to do it."

U.S. airlines rose ahead of the New York opening bell. United Airlines Holdings rose 2.8% in premarket trading, while Delta Air Lines climbed 5.4% and American Airlines Group gained 4.5%.

In Europe too, airlines were among the best-performing stocks Tuesday. Deutsche Lufthansa advanced 8.5%, while British Airways owner International Consolidated Airlines Group rose 6.2%.

Most commodity markets also saw a rally on Tuesday. Brent crude, the global benchmark for oil prices, rose 2.5%, while gold advanced 0.5%. In contrast, copper retreated 1.1%.

The equity-market performance was more muted in Asia, as a strong rally faded through the course of the day. Hong Kong's Hang Seng Index closed mostly flat, while Japan's Nikkei 225 dropped 1.2%.

In bond markets, the yield on the benchmark 10-year U.S. Treasury rose to 1.127%, from 1.085% Monday.

Bond futures are pricing in a 100% chance of interest rates being 0.5 percentage point lower by the March meeting, and a more than 70% chance that rates will be 0.75 percentage point lower than by April, according to the CME FedWatch tool.

Some analysts and investors questioned how effective monetary policy could be in counteracting the economic effects of a public health crisis.

"Cutting rates helps boost investors' confidence, but it won't help sick or quarantined people get back to work," said Bruce Pang, head of macro and strategy research at China Renaissance Securities (HK) Ltd. Fiscal policy would be more effective than action from central banks, whose results would be indirect and distorted, Mr. Pang said.

Write to Anna Isaac at [e-mail] and Xie Yu at [e-mail]

(END) Dow Jones Newswires

March 03, 2020 09:51 ET (14:51 GMT)

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