Why Is the Stock Market Dropping Today? Here Are 4½ Reasons.

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Updated Aug. 17, 2021 4:06 p.m. ET / Original Aug. 17, 2021 3:06 p.m. ET

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Covid, China, disappointing economical data, and different factors bent implicit the banal marketplace Tuesday.

JOHANNES EISELE/AFP via Getty Images

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It was an ugly time for the banal market, possibly arsenic disfigured arsenic they travel without turning into a full-blown panic. Rather than blaming a azygous happening for the weakness, galore headlines person piled connected apical of each different to propulsion stocks down.

The S&P 500 dropped 0.7% Tuesday, portion the Dow Jones Industrial Average fell 282.12 points, oregon 0.8%, and the Nasdaq Composite declined 0.9%. The small-cap Russell 2000 has slumped 1.3%.

Here are 4½ reasons the marketplace slid Tuesday:

Reason #1: Covid

Just erstwhile you thought it was harmless for markets to disregard the Delta variant of Covid-19, it has go intolerable not to. New Zealand announced it would fastener down Auckland, its largest city, for 7 days aft 1 lawsuit showed up, its archetypal caller corruption since February. China’s ports have tally into Covid-related problems arsenic well. In the U.S., five states deed grounds numbers of cases this past week. That the gait of economical maturation volition dilatory seems a given. How overmuch it slows is an unfastened question.

Reason #2: Retail Sales

Speaking of the economy, July’s retail sales declined 1.1%, the U.S. Census Bureau said Tuesday, a acold larger driblet than the 0.3% that had been forecast by economists. Other variations were adjacent worse. Excluding autos, income dropped 0.4% adjacent though economists had predicted a emergence of 0.2%, portion the “control group” that eliminates volatile goods specified arsenic gasoline fell 1%, beneath expectations for a 0.3% increase. Combine it with different caller disappointing data, and it’s capable to rekindle concerns that the U.S. has deed highest growth.

Reason #3: China

China is inactive trying to eradicate Covid, and that’s slowing its economy. But it has different issues that person thing to bash with the virus. Online shopping maturation has slowed, portion retail income and concern accumulation some disappointed. China’s crackdown connected net companies apt isn’t helping either, with stocks specified arsenic Alibaba (BABA) and Baidu (BIDU) getting crushed connected Tuesday.

Reason #4: Investors Stopped Rotating

The banal marketplace has been capable to ascent to caller highs this twelvemonth adjacent arsenic parts of the marketplace got deed hard due to the fact that investors rotated into different out-of-favor areas. That is not the lawsuit connected Tuesday: each assemblage is lower. “The S&P 500 has remained reasonably insulated from immoderate sustained weakness arsenic changeless interior rotations fend disconnected immoderate sustained selling pressure,” writes BayCrest’s Jonathan Krinsky. “Yesterday the dip was bought yet again, but frankincense acold it’s not being rewarded and divergences proceed to build.” If investors don’t commencement rotating soon, the selloff could go a bigger problem.

Reason #4.5: Afghanistan

The chaotic pullout from Afghanistan is unlikely to person an contiguous worldly effect connected the planetary economy, fto unsocial the U.S. economy, but it isn’t hard to spot it negatively affecting sentiment that has already taken a deed from ostentation and Covid.

Write to Ben Levisohn astatine ben.levisohn@barrons.com

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