NEW YORK – US stocks fell for a second straight day on Tuesday, with the Dow registering its biggest two-day drop since September 2016, pressured by healthcare stocks and rising bond yields.
The Dow also had its biggest daily percentage decline since May 2017 and the day’s 1.37-per cent fall was the second-biggest single-day drop since the election of Donald Trump, slated 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.”
Healthcare stocks pulled the major indexes lower on news that Amazon.com Inc, Berkshire Hathaway Inc and JPMorgan Chase & Co will jointly form a healthcare company to help control costs for their US employees.
The S&P 500 Healthcare index was the day’s biggest loser among the 11 major sectors, dropping by 2.13 per cent.
The Dow Jones Industrial Average fell 362.59 points, or 1.37 per cent, to 26,076.89, the S&P 500 lost 31.1 points, or 1.09 per cent, to 2,822.43 and the Nasdaq Composite dropped 64.02 points, or 0.86 per cent, to 7,402.48.
Apple Inc declined for a second day, falling 0.6 per cent 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.
LONDON – European shares fell back as global markets took a risk-averse turn, with cyclical sectors including mining and financials suffering the sharpest losses.
Europe’s STOXX 600 ended down 0.9 per cent, suffering its biggest one-day loss since early November.
“Today is more of a temporary blip rather than a fundamental change in direction for equities. There were a number of technical indicators pointing towards market complacency and today’s move should provide some relief,” said Prabhav Bhadani, equity strategist at JP Morgan.
The cyclical sectors leading the charge year-to-date were the worst hit as investors took profits after a strong run.
Goldman Sachs analysts said a correction was becoming increasingly likely as the new year ‘melt-up’ in stocks had helped the S&P 500 and MSCI World enter their longest period without a correction of more than five per cent.
Mining and financial stocks were the biggest weight, while defensive sectors outperformed.
“You are seeing some sector rotation with again the winners hit the hardest. People are still looking to stay invested but looking at things that have not performed, looking at value,” said Bhadani.
HONG KONG – Asian stocks retreated from record highs on Tuesday after a selloff in Apple shares and spike in bond yields knocked Wall Street lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.1 per cent after rising to an all-time high the previous day. It was still on track for a 6.5 per cent monthly gain.
South Korea’s KOSPI lost one per cent and Japan’s Nikkei dropped 1.4 per cent.
Hong Kong’s Hang Seng slipped 0.9 per cent and Shanghai was down 0.8 per cent.
The bearish sentiment in Asia followed a softer lead from Wall Street, which has led a global equities rally over the past year thanks to strong world growth fuelling higher corporate earnings and stock valuations.
WELLINGTON – The S&P/NZX50 Index fell 29.02 points, or 0.35 per cent, to 8.298.58 on Tuesday.