Wall Street stumbles as bond yields rise, health stocks fall
US STOCKS fell for a second straight day on Tuesday, with the Dow registering its biggest two-day drop since September 2016, pressured by health care stocks and rising bond yields. The Dow also had its biggest daily percentage decline since May 2017 and the day’s 1.37% fall was the second-biggest singleday drop since the election of Donald Trump, who was to give his first State of the Union speech later Tuesday. US Treasury yields climbed to multi-year highs after the start of the Federal Reserve’s two-day meeting, which could shed light on the central bank’s economic and rate hike outlook.
US STOCKS fell for a second straight day on Tuesday, with the Dow registering its biggest twoday drop since September 2016, pressured by health care stocks and rising bond yields.
The Dow also had its biggest daily percentage decline since May 2017 and the day’s 1.37% fall was the second- biggest singleday drop since the election of Donald Trump, who was to give his first State of the Union speech later Tuesday.
US Treasury yields climbed to multi-year highs after the start of the Federal Reserve’s two-day meeting, which could shed light on the central bank’s economic and rate hike outlook.
“Investors are catching up to the fact that rates have risen,” said Jonathan Mackay, investment strategist at Schroders in New York. “The market’s finally catching up.”
The sell-off set traders in the options market fretting about a near-term shock to equities and the Cboe Volatility Index, the most widely followed barometer of expected near-term stock market gyrations, closed up 0.95 points at 14.79, its highest close since Aug. 17.
Health care stocks pulled the major indices lower on news that Amazon.com, Inc., Berkshire Hathaway, Inc. and JPMorgan Chase & Co. will jointly form a health care company to help control costs for their US employees.
The S&P 500 Health care index was the day’s biggest loser among the 11 major sectors, dropping by 2.13%. The Dow Jones Industrial Average fell 362.59 points, or 1.37%, to 26,076.89, the S&P 500 lost 31.10 points, or 1.09%, to 2,822.43 and the Nasdaq Composite dropped 64.02 points, or 0.86%, to 7,402.48.
“Investors are getting a bit worried about inflation which has led some people to believe that the Fed might be more aggressive when it comes to raising rates,” said Robert Pavlik, chief investment strategist at SlateStone Wealth.
MetLife, Inc. fell 8.60% and was the day’s biggest daily percentage decliner in the S&P 500 after news the US Securities and Exchange Commission was investigating the insurer’s failure to pay some workers’ pensions.
UnitedHealth Group, Inc. was the biggest drag on the Dow, falling 4.30%. Pfizer, Inc. was down 3.10% despite its better-than-expected earnings and upbeat 2018 guidance.
Harley-Davidson, Inc. closed down 8% after announcing it would close a Kansas City plant in the face of declining shipments.
Apple, Inc. declined for a second day, falling 0.60% on news that the US Department of Justice and the Securities and Exchange Commission are investigating the company’s disclosure that it slowed older iPhones with flagging batteries.
Earnings so far have been stronger than expected. S&P 500 earnings growth is now forecast at 13.20%, up from 12% a month ago. Among companies that have reported so far, 80% are exceeding analysts’ expectations, according to Thomson Reuters data.
Declining issues outnumbered advancing ones on the NYSE by 4.17 to one; on Nasdaq, a 2.98-toone ratio favored decliners.
Volume so far on US exchanges was 8.10 billion shares, compared with the 7.10 billion average for the full session over the last 20 trading days. —