Dow closes down more than 100 points, snaps 4-day win streak
U.S. stocks closed lower Tuesday, amid record lows in the benchmark 10-year Treasury yield, as global growth concerns weighed.
The Dow Jones industrial average was briefly off more than 150 points in afternoon trade, with Goldman Sachs contributing the most to declines. Energy traded more than 2 percent lower and materials and financials were off more than 1.5 percent as the greatest S&P 500 decliners. The benchmark index fell 1 percent in the afternoon.
“It’s really just currency and yields. By watching currencies, watching yields, you get a pretty good sense of what’s on investors’ minds and right now it looks like slowing economic growth,” said Jack Ablin, chief investment officer at BMO Private Bank.
Longer-end Treasury yields held near record lows, with the 30-year yield around 2.13 percent. The 10-year yield hit an all-time low, according to Reuters Tradeweb data going back to 1953.
The U.S. dollar index traded about half a percent higher, with the euro around $1.11 and the yen around 101.5 yen versus the greenback. Pound sterling traded near $1.304, around levels not seen in more than 30 years.
U.S. crude oil futures for August delivery settled down 4.88 percent or $2.39, to $46.60 a barrel. Natural gas prices fell roughly 7 percent.
U.S. markets were closed Monday for the July 4 holiday, after the Dow Jones industrial average and S&P 500 recovered most of their post-Brexit losses to post their best week of the year so far.
“As of Friday’s close in the U.S., that assumed Brexit was no big deal, that it was a non-event,” said Peter Boockvar, chief market analyst at The Lindsey Group. “That was naive.”
“I think we’re taking our cue from Europe, weakness in European banks,” he said.
European stocks closed mostly lower, with the German DAX off more than 1.8 percent. The STOXX Europe 600 Banks index traded more than 2.7 percent lower, tracking for its worst day in more than a week. The FTSE 100 closed about a third of a percent higher.
On Monday, the European Central Bank opened the door to state aid for euro zone banks, with Italy in talks with the European Commission over a plan to recapitalize Italian lenders with public money, Reuters reported.
Separately, Standard Life Investments, the fund arm of insurer Standard Life, suspended Monday all trading in its UK real estate fund, Reuters said. The decision was taken after an increase in redemption requests due to uncertainty following the EU referendum result, the firm said in a statement cited by the news wire.
In afternoon trade, U.S. crude oil futures were off about 4.5 percent, below $47 a barrel. The Dow transports traded more than 1.5 percent lower with Avis Budget and Delta Air Lines leading all constituents lower.
The Nasdaq composite traded about 1 percent lower. Apple traded more than 1 percent lower and the iShares Nasdaq Biotechnology ETF (IBB) traded more than 1 percent lower in afternoon trade.
Citi cut estimates for Apple’s fiscal third and fourth-quarter earnings Tuesday, citing Brexit-related macroeconomic uncertainty, currency volatility and longer iPhone replacement cycles.
U.S. stocks closed higher Friday, the first trading day of the second half of the year. Traders attributed much of the four-straight days of gains to seasonal flows and recovery from the post-Brexit plunge that erased about $3 trillion globally in paper assets.
“At the end of the day it still leaves a lot of questions about global economic activity,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
“I think it’s a market in need of a catalyst,” he said.
Factory orders declined 1.0 percent in May. The highly anticipated employment report is due Friday.
Treasury yields edged lower, while the U.S. dollar index turned to trade a touch higher.
New York Fed President William Dudley said the U.S. economy is doing OK on average but if Brexit leads to questions about the stability of the European Union, it could have more severe consequences for the U.S. economy. He cited low inflation and uncertainties over outlook as reasons to be patient on raising rates.
The major averages briefly dipped to session lows amid FBI Director James Comey’s late-morning comments about the investigation into Hillary Clinton’s use of a private email servers. He said his office is not recommending that prosecutors bring charges against Clinton.
Art Hogan, chief market strategist at Wunderlich Securities, said the remarks give “certainty around who the (presidential) candidates are going to be now” and the markets’ focus would return to existing concerns.
Overnight, Asian stocks were mostly lower, with the Hang Seng nearly 1.5 percent lower and the Nikkei 225 about two-thirds of a percent lower.
The Caixin China services PMI hit an 11-month high in June, at 52.7 from 51.2 the prior month.
In afternoon trade, the Dow Jones industrial average declined 92 points, or 0.51 percent, to 17,856, with JPMorgan Chase leading decliners and Johnson & Johnson the top gainer.
The S&P 500 declined 13.7 points, or 0.65 percent, to 2,089, with energy leading seven sectors lower and consumer staples the top advancer.
The Nasdaq composite declined 37 points, or 0.76 percent, to 4,826.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded more than 10 percent higher, breaking a 5-day losing streak during which it fell 42.7 percent.
About three stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 626.7 million and a composite volume of 2.8 billion in afternoon trade.
Gold futures for August delivery settled at $1,358.70 an ounce, up $19.70.