Sell-off in industrial, tech stocks sends Dow down 400

NEW YORK —After a strong start, U.S. stocks abruptly sold off Tuesday after machinery maker Caterpillar said it doesn’t expect to top its first-quarter profit for the rest of the year. The Dow Jones industrial average plunged as much as 619 points as investors feared that rising oil prices and other costs will slow down growth in company profits.

Stocks climbed in early trading as companies like Caterpillar, appliance maker Whirlpool, and Fifth Third Bancorp posted strong quarterly results. Then Caterpillar executives told analysts on a conference call in the late morning that they don’t expect the company to report a larger per-share profit for the rest of 2018. Other industrial, technology and basic materials companies also took sharp losses.

The S&P 500 index sank 35.73 points, or 1.3 percent, to 2,634.56. The Dow Jones industrial average finished with a loss of 424.56 points, or 1.7 percent, to 24,024.13. The Nasdaq composite dropped 121.25 points, or 1.7 percent, to 7,007.35.

Small-company stocks held up better than the rest of the market. The Russell 2000 index declined 8.84 points, or 0.6 percent, to 1,553.28, about half as much as the S&P 500, which tracks large U.S. companies.

Caterpillar’s products are used in a wide variety of industries including construction, power generation, mining and oil and gas drilling.

The companies’ statements came as interest rates kept rising, which makes it more expensive for companies to borrow money. The yield on the 10-year Treasury note rose to 3 percent for the first time in more than four years.

Stocks shot up at the end of 2017 and the start of 2018 as investors bet that the corporate tax overhaul would lead to bigger profits for American companies and greater economic growth. Gina Martin Adams, chief equity strategist for Bloomberg Intelligence, said it hasn’t happened yet.

The worries began to set in after construction and mining equipment maker Caterpillar said it doesn’t expect to top its first-quarter profit for the rest of this year.

Wall Street had cheered Caterpillar’s results earlier in the day after the company had a strong first quarter and raised its forecasts for the year. But the stock gave up those gains and finished with a loss of 6.2 percent at $144.44.

Bond prices slipped again Tuesday. The yield on the 10-year Treasury note rose to 2.99 percent from 2.98 percent. Earlier it peaked at 3 percent for the first time since January 2014.

Low interest rates have played an important role in the economic recovery of the last decade, and the yield on the 10-year note is a benchmark for many kinds of interest rates including mortgages. It’s been climbing because investors expect higher economic growth and inflation.

Since the global financial crisis in 2008-09, a combination of low inflation expectations and a bond-buying program by the Federal Reserve have helped keep bond yields low, but they have climbed this year as inflation expectations have picked up. The 10-year yield traded at 2.43 percent at the beginning of the year.

Benchmark U.S. crude oil shed 1.4 percent to $67.70 a barrel in New York. Brent crude, used to price international oils, fell 1.1 percent to $73.86 per barrel in London.

Wholesale gasoline lost 1.4 percent to $2.09 a gallon. Heating oil dipped 0.6 percent to $2.13 a gallon. Natural gas rose 1.5 percent to $2.78 per 1,000 cubic feet.