Weak car sales pull stocks down, but Tesla jumps

U.S. stocks started the second quarter with a thud Monday after car makers reported disappointing March sales, a possible warning about other types of spending. But a late-in-the-session recovery saved stocks from bigger losses.

Stocks tumbled in morning trading after automakers including Ford and General Motors said passenger car sales slumped last month. Auto-parts and rental-car companies also tumbled. Spending by shoppers is a crucial part of economic growth, and investors found themselves wondering if spending will keep growing as it has in recent years. Small companies slumped, as their performance is closely linked to U.S. economic growth.

Although stocks recovered most of their earlier losses, the weak car sales still sent a chill through the market. Steven Ricchiuto, chief U.S. economist for Mizuho, said auto sales have been a major part of the U.S. economy recently, and if car sales fall, consumer spending would also weaken. That in turn might mean manufacturers and other companies won’t open as many factories or hire as many workers.

“If we’re starting to lose some of the momentum on autos, where is the momentum going to come from?” he said.

The Standard & Poor’s 500 index was down as much as 18 points midsession, but it finished down just 3.88 points, or 0.2%, at 2,358.84. The Dow Jones industrial average lost as much as 145 points but closed down 13.01 points, or 0.1%, at 20,650.21. The Nasdaq composite fell 17.06 points, or 0.3%, to 5,894.68. The Russell 2000 index of small-company stocks slid 16.25 points, or 1.2%, to 1,369.67.

Ford, Fiat Chrysler, Toyota and Honda all said their overall sales decreased in March as sales of passenger cars kept falling. GM reported its sales were up thanks to stronger SUV sales, but its totals weren’t as good as experts expected.

Auto sales have reached all-time highs in recent years, but companies are offering more cash, incentives and low-interest loans to draw in buyers. Investors are getting worried that companies will be stuck with vehicles they’ll have to sell at big discounts.

Fiat Chrysler shares slid 4.8% to $10.41 and General Motors stock dropped 3.4% to $34.17. Ford fell 1.7% to $11.44.

Five of the eight worst performers in the S&P 500 came from the auto industry. Auto parts retailer O’Reilly Automotive sank 4.1% to $258.69. Auto retailer AutoNation declined 3.1% to $40.84. Goodyear Tire fell 2% to $35.28.

Tesla said over the weekend that its deliveries jumped 69% in the first quarter to a high of 25,000. The electric car company’s stock jumped 7.3% to $298.52. Tesla’s market capitalization rose to $48.7 billion, greater than Ford’s.

Bond prices rose sharply. The yield on the 10-year Treasury note fell to 2.33% from 2.39%. When bond yields fall, interest rates also decrease, and that affected banks and financial institutions.

As investors felt less certain about the performance of the economy, they sold stocks in companies that do the best when the economy is growing quickly. Retailers, technology companies and industrial companies fell more than the rest of the market.

Healthcare companies finished with small gains as big health insurers rose. Cigna advanced 2% to $149.39, Humana climbed 1.8% to $209.77, and Aetna and UnitedHealth each rose about 1%.

Novocure soared 37% to $11.10 after a study of its Optune device, which uses electric fields to fight cancer, appeared to improve survival for patients with aggressive brain tumors. Over the weekend the company said 13% of patients treated with the device as well as chemotherapy were still alive after five years, compared with 5% for the patients who received only chemotherapy. Many doctors are skeptical of the product, and it’s costly, at $21,000 a month.

The dollar sank to 110.96 yen from 111.29 yen. The euro fell to $1.0665 from $1.0684.

Benchmark U.S. crude fell 36 cents to $50.24 a barrel. Brent crude, used to price international oils, fell 41 cents to $53.12 a barrel. Wholesale gasoline fell 1 cent to $1.69 a gallon. Heating oil fell 1 cent to $1.56 a gallon. Natural gas sank 6 cents, or 1.9%, to $3.13 per 1,000 cubic feet.

Gold rose $2.80 to $1,254 an ounce. Silver fell 4 cents to $18.21 an ounce. Copper fell 5 cents, or 1.8%, to $2.60 a pound.

France’s CAC 40 slid 0.7%. The German DAX and the British FTSE 100 each sank 0.5%. Japan’s benchmark Nikkei 225 advanced 0.4% and the Kospi in South Korea rose 0.3%. Hong Kong’s Hang Seng gained 0.5%.

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UPDATES:

2:25 p.m.: This article was updated with closing prices, context and analyst comment.

7:35 a.m.: This article was updated with market prices and context.

This article was originally published at 6:50 a.m.