U.S. Stocks Pull Back From All-Time Highs

By Jon SindreuFeaturesDow Jones Newswires

Stock markets around the world moved lower Tuesday as investors dialed back their exposure to riskier investments after a long holiday weekend in the U.S. and Britain.

The Dow Jones Industrial Average fell 29 points, or 0.1%, to 21052 shortly after the opening bell. The S&P 500 dropped 0.1%, and the Nasdaq Composite added less than 0.1%.

Continue Reading Below

The Stoxx Europe 600 declined 0.3%, led by falls in the telecom and household-goods sectors.

In the U.K., the FTSE 100 fell 0.3%, dragged lower by a 2.4% drop in shares of International Consolidated Airlines Group, owner of British Airways, after around 75,000 passengers had their flights canceled Saturday and Sunday because of a computer crash.

Analysts also focused on comments by former Italian Prime Minister Matteo Renzi that suggested elections in Italy this year were likelier. Italian 10-year yields were little changed, falling slightly to 2.011% from Monday's 2.169% close.

Cross-party agreement about reforming Italy's voting system "suggests that they may be willing to press President Sergio Mattarella to dissolve the parliament before the summer break," said Barclays PLC analyst Fabio Fois.

While the rise of the populist 5 Star Movement in Italy is a danger for financial markets, there is a lull in political risk, said Thomas Clarke, portfolio manager at William Blair, who recently increased his holdings of eurozone equities, including Italian ones.

"The compensation is high enough that we still find them attractive," he said.

Investors are feeling broadly optimistic after a positive first quarter for corporate earnings, but are trying to gauge if strong economic data and low market volatility can last.

Since the start of 2017, funds have started moving more of their money into Europe and emerging markets, as data shows the U.S. is no longer alone in powering global economic growth. Some money managers are concerned that a few sectors of the U.S. economy, such as the auto industry, are flashing warning lights after years of good performance.

"Clearly we are late in the economic cycle," said Ryan Detrick, senior market strategist for LPL Financial, adding, "we've got another year or two of good potential economic growth [in the U.S.]"

Data for U.S. consumer confidence and personal income and spending are due this week, as is the closely watched monthly jobs report.

Meanwhile, eurozone inflation and economic confidence data will shed further light on the strength of the Continent's recovery.

On Tuesday, figures showed the French economy grew at a faster rate than previously estimated during the first quarter of the year.

Policy makers have emphasized that recent rises in inflation across the globe have been largely driven by a recovery in commodity prices, rather than consumers depleting shelves. Both the Federal Reserve and the European Central Bank have signaled that monetary policy will remain loose for an extended period, supporting both stocks and bonds.

Sovereign bond yields, which move inversely to prices, remain very low across developed nations and edged down Tuesday. In the U.K., where rates are expected to stay at record lows as the country starts a lengthy divorce from the European Union, 10-year gilt yields fell to the lowest level since last October, later recovering slightly to 1.015%.

Investors have long speculated that ECB officials would use their June policy meeting to give indications of how and when the central bank's EUR60 billion ($67 billion) monthly bond purchases are likely to be tapered. However, ECB President Mario Draghi said Monday that " an extraordinary amount" of monetary firepower remained necessary.

"Next week's ECB meeting will, in our view, only deliver new words but no action," said Carsten Brzeski, economist at ING Groep NV. "We expect the ECB to announce first subtle changes to its risk assessment and forward guidance."

The euro fell 0.4% against the U.S. dollar after Mr. Draghi's announcement, but later regained some ground to trade at $1.1159, almost unchanged from Monday's close.

In Asia, the Nikkei Stock Average closed broadly flat, having been down as much as 0.6% during the day, as the yen strengthened against the dollar. The South Korean Kospi fell 0.4% and Australia's S&P/ASX 200 gained 0.2%.

The yen was up 0.4% against the dollar and 0.5% versus the euro, amid a string of strong data releases in Japan on Tuesday.

Markets in mainland China, Hong Kong and Taiwan remained shut for the Dragon Boat Festival.

--Kenan Machado contributed to this article.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

May 30, 2017 09:54 ET (13:54 GMT)