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Wall Street Opens Lower: China, Fed Meeting Prompt Caution; Dow Down 175 Pts

Stock MarketsJul 27, 2021 09:37AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. stock markets opened lower on Tuesday, with heavy selling in Chinese markets, the start of the Federal Reserve's policy meeting and the prospect of earnings from megacap U.S. tech companies all arguing in favor of caution in the near term.

By 9:35 AM ET (1335 GMT), the Dow Jones Industrial Average was down 177 points, or 0.5% at 34,968 points. The S&P 500 was also down 0.5% and the Nasdaq Composite was down 0.4%. All three had finished at record highs on Monday, supported by an ongoing earnings season that is broadly living up to expectations. 

Another marginal headwind came from June's durable goods orders, which rose by less than forecast at only 0.3%. That was their weakest performance in five months. 

However, many of the industrials reporting earnings before the bell had positive stories to tell. General Electric (NYSE:GE) stock rose 3.3% after it raised its full-year outlook for industrial cash flow, the metric most closely tracked by the market. The report reflected improved conditions for its aviation division, as revenue from servicing aero engines picked up in line with the revival in air travel. The same factor also enabled Raytheon (NYSE:RTN) - the owner of Pratt & Whitney - to beat expectations with its earnings update. Raytheon stock rose 2.7%.

Tesla (NASDAQ:TSLA) stock opened lower despite posting gains in both after-market and premarket sessions on the back of its record sales and profit numbers released late Monday. Despite a best-ever operating performance, the company's guidance contained some disappointments, with fresh delays to the Semi and cybertruck projects, and CEO Elon Musk - currently on trial for defrauding investors with the acquisition of Solar City in 2016 - saying he will step back from future earnings calls. 

Chinese ADRs were once again in the spotlight, after what amounted to panic selling in Chinese stock and bond markets overnight. Alibaba (NYSE:BABA) stock fell 2.7% and Tencent (OTC:TCEHY) stock fell 4.6% as U.S. investors continued to bail out against a backdrop of an ever-broader assault on the country's Internet giants by Chinese regulators. There was, however, some respite for educational technology names after a torrid couple of sessions. TAL Education (NYSE:TAL), New Oriental Education & Technology (NYSE:EDU) and GSX Techedu (NYSE:GOTU) all rose by between 12% and 17%, but have still lost more than half their value since news first leaked that the Chinese government wants them to restructure as not-for-profit operations.

Elsewhere, United Parcel Service (NYSE:UPS) stock fell 9.1% after it warned that margins may be squeezed over the rest of the year, despite CEO Carol Tomé’s “better not bigger" approach. That overshadowed a healthy rise in both earnings and revenue in the second quarter, thanks to sustained high demand for courier services during the pandemic. FedEx (NYSE:FDX) stock also fell 4.8% to a three-month low amid concerns it will suffer a similar fate. 

The Federal Reserve begins a two-day policy meeting later, at a time when inflation-adjusted yields on U.S. bonds are at their lowest ever. Low real yields typically are an expression of doubt about future growth, and the current level is starkly at odds with markets that are as expensive now as at any time since the Internet bubble over 20 years ago.

Wall Street Opens Lower: China, Fed Meeting Prompt Caution; Dow Down 175 Pts
 

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Comments (13)
Franco Dominguez
Franco Dominguez Jul 27, 2021 1:43PM ET
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elder will said the same rethoric since "before the pandemic" not hike right now until 2022 and the lazy investors always throws the market
Rawat Surendra
Rawat Surendra Jul 27, 2021 12:35PM ET
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2-3% more down side
Sloppy Joe
Sloppy Joe Jul 27, 2021 12:11PM ET
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dont worry Powel and melody boys are long...
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 27, 2021 11:01AM ET
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Watch out for the collapse due to expanding wedge formation. No way to escape from it.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 27, 2021 10:59AM ET
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Stagflation is really not a new word. Many will now experience than just reading about it in history
Nick Leeds
Nick Leeds Jul 27, 2021 10:59AM ET
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You mean like snowflake millennials who can't even cook a meal for themselves so they order from grubhub or uber eats or goto restaurants every night... How do they pay for it??? Credit card of course
Pratt Man
Pratt Man Jul 27, 2021 10:53AM ET
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The economy is still not 100% open and we'll have record profits and an 8% GDP. You can talk all you want about corrections, but in the long run. this market is under valued.
john ghabana
john ghabana Jul 27, 2021 10:53AM ET
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exactly
Jouni Matero
Jouni Jul 27, 2021 10:53AM ET
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You guys are so out of reality. Go read some real economy data under the hood and you may realize economy is anything but booming. On the other hand, just keep in your bubble.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 27, 2021 10:48AM ET
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1100 point sell off in sp500, I know will be 25% correction
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 27, 2021 10:42AM ET
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I wonder how many sp500 points will be a 10% correction?
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jul 27, 2021 10:36AM ET
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Massive housing market collapse coming. Lumber futures just hit a circuit breaker down
pasa pada
pasa pada Jul 27, 2021 10:36AM ET
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right....
Sean Livingstone
Sean Livingstone Jul 27, 2021 10:31AM ET
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You can disagree with China's approach to control monopolies, but you cannot deny that the US is doing it wrong. Wealth in the US is controlled by the top 1-5%, and even as the economy grows over the years by 11 trillion, many Americans remain poor. The American approach is to redistribute wealth via welfare distribution, i.e. steal from the rich and give it to the poor. China is doing it in another way. It is trying to make sure wealthy individuals do not maintain monopoly over the market and thus prevent poor entrepreneurs from becoming disadvantaged by the more powerful monopolies. Instead of handing out welfare and money to the poor, they provide free seeds to the farmers, providing consulting to help the farmers and provide loans that they have to repay. Money is spent on roads to connect them to big cities. The US works under the pretense that if I give poor people money, they will be rich. If I tax the rich, they will provide for the poor. China concept seems to work better..
Sean Livingstone
Sean Livingstone Jul 27, 2021 10:31AM ET
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Kate Davis  the usual refuse to listen to what other countries are doing. China's approach is very similar to what Taiwan and Singapore have been doing over the years. So what is so communist about Taiwan and Singapore? You are too ignorant to look beyond the United States.
michael engel
michael engel Jul 27, 2021 10:22AM ET
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Tencent reached dma200.
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jul 27, 2021 10:10AM ET
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Fed will increase bond purchases
Jh Lee
Jh Lee Jul 27, 2021 10:10AM ET
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what?
Mitchel Pioneer
Mitchel Pioneer Jul 27, 2021 10:03AM ET
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100 points in losses whisked out of the system at the open.  What a joke.  Remarkable how 100 points in "gains" doesn't vanish at the open during "rallies."  Assume the proper position America, as the US Ponzi Scheme, laughingstock of the financial world, continue to defraud the US working class in broad daylight.
 
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