Stocks Pull Back from Record Highs

Stocks dropped on Monday as investors assessed equity valuations and the outlook for more COVID-19 relief stimulus, along with ongoing political turmoil.

The Dow Jones Industrials retreated 85.57 points to 31,012.40.

The S&P 500 moved downward 13.91 points from Friday’s all-time high to 3,810.77

The NASDAQ shed 77.64 points to 13,124.34, from Friday’s all-time high.

The stock market is coming off a solid week to start 2021 as investors looked past a violent siege of the Capitol and focused on the prospect for additional fiscal stimulus after a Democratic sweep of Congress. The S&P 500 climbed for four days straight to a record with a 1.8% gain last week. The Dow picked up 1.6%, and the tech-heavy NASDAQ gained 2.4% in the prior week, also reaching all-time highs.

Yet the rally in the face of political upheaval and a pandemic has raised concerns that investors have grown too exuberant. Shares of Tesla, for example, were up 25% last week and 800% in the last 12 months.

They now trade for around 90-times 2021 cash flow. Tesla shares were off by 3.5%. Bitcoin, which has been a symbol of speculation in the financial markets, was back down to $32,000 on Monday after trading above $40,000 over the weekend.

Shares of Boeing were off 1.5% on Monday.

Tensions were high in Washington again this week and it remains to be seen when or if the markets will be affected by it. Democrats, with the support of some Republicans, are moving toward starting impeachment proceedings in the House of Representatives against President Donald Trump as soon as this week for inciting the mob attack at the Capitol. The House Rules Committee is expected to expedite impeachment proceedings without committee hearings or votes.

House Speaker Nancy Pelosi said the lower chamber would push for Trump’s impeachment if Vice President Mike Pence and the current administration’s cabinet balked at removing the president through the 25th Amendment.

For now, the market appears to be looking past it because Congress was able to successfully confirm Biden’s election win and Democrats now in the Senate majority are likely to pursue another big stimulus. If these events start to delay or derail those stimulus plans, traders may start to pay more attention.

President-elect Joe Biden pledged Friday a hefty economic stimulus rollout, which he said will be “in the trillions of dollars.” More details will follow in a formal announcement on Thursday, six days before he is slated to take office.

Prices for the 10-Year Treasury faded slightly, raising yields to 1.13% from Friday’s 1.12%. Treasury prices and yields move in opposite directions.

Oil prices lopped off 24 cents to $52.00 U.S. a barrel.

Gold prices regained $12.90 to $1,848.30 U.S. an ounce.

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