Stocks slide, tobacco shares feel the heat

NEW YORK: Stock markets slid Tuesday, with Wall Street continuing to retreat from record highs, while shares in tobacco firms plunged on reports the US will crack down on cigarette nicotine levels.

While both the Dow and the S&P 500 finished last week at new peaks and also posted their fourth consecutive weekly gains, shares have fallen over the past two days as earnings season enters its second week.

"It seems like investors might be having a bit of a second thought up here as US earnings season starts to heat up and peak optimism is beginning to set in," said Stephen Innes of Axi.

Stocks are under pressure amid questions over whether the expected benefits of a speeding post-Covid economy were already priced in.

"Earnings have been coming through fine, even better than fine," said Maris Ogg of Tower Bridge Advisors. But good results are "not so much an upside surprise," she added.

Wall Street's indices finished solidly lower, with the S&P 500 down 0.8 percent.

"There are some festering concerns about rising coronavirus cases around the world, ongoing lockdown restrictions around the world and vaccination efforts around the world that aren't up to full speed for a variety of reasons, including supply problems," said Patrick O'Hare at Briefing.com.

New restrictions?

Japan's Nikkei ended the day down two percent after investors took in calls for new states of emergency in the Osaka region and possibly Tokyo, prompted by rising case numbers.

The new measures could involve tougher restrictions including asking shops and restaurants to close, according to local media.

"Along with increased new coronavirus infections, the possibility of a state of emergency declaration is growing, which is turning on an amber light for economic recovery," Okasan Online Securities said in a commentary.

Losses were also sharp in Europe, with both London and Paris ending around two percent lower.

"Stocks in Europe appear to have run out of steam after the gains of the last seven weeks, with profit taking appearing to be the order of the day," said Michael Hewson, chief market analyst at CMC Markets UK.

Meanwhile, shares in tobacco firms took a beating after The Wall Street Journal reported that the United States is considering requiring them to lower the nicotine in all cigarettes sold in the country to levels that are no longer addictive. The White House declined comment.

"Despite the fact that rumors of this regulation have been around for years, and while some may downplay the effectiveness of the ban, it is clear that more governments are moving in this direction and that it is becoming a real possibility in the short term," said XTB market analyst Walid Koudmani.

Shares in Lucky Strike maker British American Tobacco plunged 7.6 percent.

Meanwhile, shares in Imperial brands, maker of Winston and Kool, fell 7.3 percent.

Altria, owner of Marlboro-maker Philip Morris, dropped 3.9 percent.