By Paul Vigna and Joanne Chiu
U.S. stocks eked out small gains Monday, despite comments from Warren Buffett over the weekend where the world's most famous investor said he sold his airlines holdings and talked candidly about his concerns in the market.
The Dow Jones Industrial Average was up 0.1% at 23750 as of the 4 p.m. ET close of trading. The S&P 500 was up 0.4% and the Nasdaq Composite was up 1.2%. The Dow industrials had been down as many as 363 points in the morning.
Equities appeared to be following a rally that started in the oil market.
The nuanced comments from Mr. Buffett, the chief executive of Berkshire Hathaway Inc., reflect the state of the markets and world. Stocks have come off their March lows, but value judgements are difficult given the economy. The markets appeared to be pricing in a quick recovery from the coronavirs pandemic, but bonds haven't reflected that, and equities themselves have stalled the past two weeks.
Meanwhile, the economy is still under pressure. On Monday, retailer J. Crew Group Inc. filed for bankruptcy protection, crushed by the damage from coronavirus. It was the first big retailer to do so, but others are likely to follow.
Mr. Buffett reported that he sold his entire stake in four airlines, and talked about problems in that sector, energy, and small businesses, too. While he sounded optimistic notes and waxed about "American magic," he also conceded that he didn't see any attractive investments right now.
"For him to come out and say 'I don't see any opportunities' is a big thing," said Greg Harmon, founder and president of Dragonfly Capital. "It's clear to him that it's not time for everything to start going up."
The airlines Mr. Buffett sold were all down on Monday. Delta Air Lines declined 7%, United Airlines Holdings slid 5.4% and American Airlines Group was down 8.2%. Southwest Airlines also slipped 5.7%.
"What [Mr. Buffett] said is entirely reasonable," said Robert Colby, chairman of Robert W. Colby Asset Management. "He's keeping his cash hoard, and so am I." Mr. Colby, who earlier advised his clients to get out of stocks, said he sees no good reason to buy equities right now.
Meanwhile, investors were also nervous after a seeming renewal of antagonism between the U.S. and China.
The Trump administration stepped up assertions that the new coronavirus originated at a laboratory in the Chinese city of Wuhan, with Secretary of State Mike Pompeo saying Sunday that he has seen "enormous evidence" for this. The White House will release a "conclusive" report on the topic, according to President Trump.
More than the accusations themselves, investors are taking the increase in tensions seriously, said Sebastien Galy, a macro strategist at Nordea Asset Management.
"The last escalation was pretty detrimental for equity markets," he said, referring to the selloff in mid-2019 at the height of the U.S.-China trade war. "A de-escalation process can take weeks."
Elsewhere, companies are still reporting earnings. Tyson Foods fell 7.8% after releasing an earnings report that showed its quarterly sales and earnings per share missed estimates. The meat processing giant said the coronavirus has impacted its productivity and raised its costs. Earnings are also due Monday from insurer American International Group after the market closes.
Kerry Craig, global-market strategist at J.P. Morgan Asset Management, said a deteriorating earnings outlook had yet to be reflected in analyst consensus forecasts, which for the U.S. market for 2021 suggest higher earnings than in 2019.
"It's quite an optimistic scenario in our view," he said. Some investors were happy to trim positions after a strong rally since the market troughed in March, he added.
In Europe, the pan-continental Stoxx Europe 600 fell 2.7%, playing catch-up after most European markets were closed Friday for the May 1 holiday.
Benchmarks in Asia declined, with Hong Kong's Hang Seng Index, which was closed for the previous two sessions, playing catch-up to lose 4.2%. South Korea's Kospi Composite fell more than 2.5%. Markets in mainland China and Japan were closed for holidays.
U.S. crude-oil futures for delivery in June rose 3.1% to $20.39 a barrel.
The dollar strengthened, with the ICE U.S. dollar index rising 0.4% as investors sought safety in safe-haven assets. The yield on benchmark 10-year Treasury notes fell to 0.634% from 0.641% on Friday. Yields fall as prices rise. Gold rose 0.7% to trade at $1,706.90 an ounce.
Investors will have plenty of economic data to scrutinize this week, including trade figures from China due Thursday and Friday's U.S. employment report, which is likely to show heavy job losses and skyrocketing unemployment for April.
A release of purchasing managers indexes Monday for several Western European countries showed that coronavirus lockdowns sent manufacturing activity to all-time lows in Germany, France, Spain and Italy in April.
France's stock market was among the biggest losers in the region Monday, with its CAC 40 index declining 4.2%, the most in over a month. It was weighed down by luxury, oil and industrial stocks that took a beating on rising concerns about Chinese demand. LVMH, which owns brands such as fashion label Louis Vuitton and Moet champagne, slumped 3.9%.
Shares in industrial group Thyssenkrupp plunged 14% after an internal letter to staff warned it will have less cash left over from the sale of its elevator business than previously thought as the pandemic is eating into its remaining businesses. Thyssenkrupp agreed to sell its elevator business for EUR17.2 billion ($18.8 billion) in February, a deal that is expected to close this year.
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