CNBC: Tuesday, 8.2.16 1:34pm EST
U.S. equities traded lower Tuesday, following global stock markets lower, particularly in Japan and Europe.
The Dow Jones industrial average held more than 150 points lower in afternoon trade, putting it on track for its first seven-day losing streak since August of last year. Apple and Goldman Sachs contributed the most losses within the Dow.
The benchmark S&P 500 held about 1 percent lower, as consumer discretionary and information technology lagged. “They took out yesterday’s low and they broke down below 2,160 and I think its feeding on itself,” said Art Cashin, director of floor operations at UBS. The 2,160 level on the S&P is the top of a key support area.
The Nasdaq composite underperformed, falling 1 percent, and was on track to snap a five-day winning streak.
“I think we’re seeing a shift in sentiment where investors are taking the path of least resistance to pressure stocks,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, adding the market is also taking a breather from its recent rally.
“If it’s a short, orderly pullback, then this is a healthy pullback,” said Adam Sarhan, CEO of Sarhan Capital.
Overnight, Japan’s Nikkei 225 fell 1.47 percent as investors awaited for a hefty fiscal stimulus plan announced last week. That said, the government’s $132.04 billion plan was not enough to calm investors, as the yen soared to a three-week high versus the dollar, according to Reuters. The traditional safe-haven currency was last up 1.4 percent, near 100.9.
“I think I heard it was their 24th over the past 25 years. I believe this is the 5th since Abe took office,” Peter Boockvar, chief market analyst at The Lindsey Group, said in a Tuesday note to clients.
“I’ll say again, if [negative interest-rate policy] is now being repudiated as a good idea (thank heavens if it is) and limits are being realized in the amount of government bonds that can be purchased, was the blow off rally in global sovereign bonds post UK vote the end for now in the global bond market rally? I believe it is very likely. Yields are jumping throughout Europe and in US Treasuries as well,” Boockvar said.
U.S. Treasuries broadly fell Tuesday, with the two-year note yield rising to 0.67 percent and the benchmark 10-year yield holding near 1.54 percent.
European stocks fell, with the pan-European Stoxx 600 index closed more than 1 percent as concerns over the region’s banks weighed. The Stoxx Banks index fell more than 3 percent lower.
“Deutsche Dank and Credit Suisse … are dropping to where they were after the Brexit vote,” said Bruce Bittles, chief investment strategist at R.W. Baird. “That’s causing some anxiety.”
Deutsche and Credit Suisse’s U.S.-listed shares were down 3.4 percent and 4.7 percent in late-morning trade, respectively.
Wall Street also kept an eye on oil prices, as U.S. crude fell 1.4 percent, near $39.50 per barrel, erasing earlier gains amid oversupply concerns. On Monday, WTI fell more than 3 percent to record its worst settlement since April 20.
“It seems the correlation between oil and the stock market seems to have divorced itself,” said Peter Cardillo, chief market economist at First Standard Financial. “Unless you see something dramatic, I think the market is paying more attention … to the potential of growth.”
On the economic data front, personal income rose 0.2 percent in June, just below expectations, while personal consumer spending for the same month advanced 0.4 percent, beating estimates. July auto sales data is also due throughout the day Tuesday.
Investors will digest the latest employment statistics on Friday, when the Bureau of Labor Statistics releases the July nonfarm payrolls report.
Sarhan, CEO of Sarhan Capital, said the Federal Reserve may try to indicate the possibility of a rate hike “with its rhetoric” if the number of jobs created is much higher than expected, but “I don’t think they raise rates in September.”
Mike Bailey, director of research at FBB Capital Partners said that, even with a strong jobs number, “the poor GDP number is going to pour could water on that.”
Meanwhile, earnings season continued Tuesday, as Dow componentPfizer posted quarterly results. “We’ve had a pretty good earnings period so far,” said J.J. Kinahan, chief strategist at TD Ameritrade. “We’ll see if that continues.”
The S&P 500 fell 18 points, or 0.85 percent, to trade at 2,152, with consumer discretionary leading all sectors lower.
The Nasdaq dropped 60 points, or 1.16 percent, to trade at 5,124.
U.S. crude fell 56 cents, or 1.42 percent, to $39.49 a barrel.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded 10.8 percent higher, near 13.8.
About five stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 372 million and a composite volume of 1.687 billion in midday trade.
Gold futures for December delivery rose $12.90 to $1,372.50 per ounce.
*Planner subject to change.
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