U.S. stocks accelerated declines in afternoon trade Tuesday, led by a selloff in industrials, materials and technology shares.
The selling pressure came after the 10-year Treasury yield touched the psychologically important 3% level for the first time in four years, a move that comes as first-quarter earnings season was failing to excite investors, despite some strong results.
While the earnings season remained in full swing, the tone was generally negative, with several bellwether stocks slumping despite posting numbers that were ahead of analyst forecasts.
What are markets doing?
The Dow Jones Industrial Average
slumped 541 points, or 2.2%, to 23,907. The S&P 500 index
fell 44 points, or 1.7%. The Nasdaq Composite Index
declined by 140 points, or 2%, to 6,989.
Percentage losses were the largest since April 6.
If the Dow closes in negative territory, that will mark its fifth straight negative session, its longest such streak since March 2017. The Nasdaq is threatening its fourth straight down day, its longest streak since February.
What is driving the market?
Trading in the stock market has been heavily influenced by U.S. Treasury yields, and that theme re-emerged as the 10-year Treasury yield
touched the psychologically important 3% handle on Tuesday and hit a four-year high. Yields and debt prices move in opposite directions. The 10-year yield subsequently pulled back to trade at 2.979%. Yields and debt prices move in opposite directions.
Earnings were also in focus, with a deluge of high profile companies reporting results before the open. The season has so far been strong, and more than 80% of the S&P 500 companies reporting so far have beaten profit forecasts. While that’s above the 73% that beat in the fourth quarter of 2017, better-than-expected results often haven’t been enough to lift shares thus far this season.
What are strategists saying?
“Crossing 3% on the 10-year is something that will certainly raise concerns, but at this stage of the cycle, higher yields aren’t antithetical to rising stock prices. For the time being I think we’re fine, but we’re certainly keeping an eye on the yield curve, especially if the Fed becomes more aggressive,” said Bruce McCain, chief investment strategist at Key Private Bank. “Ultimately earnings remain the primary driver, along with the fact that the economy is still in pretty good shape.
Hussein Sayed, chief market strategist at FXTM, said that “the 3% by itself is just a psychological level and not a significant threat, but if a break above leads to further selling in Treasury bonds, that’s going to be a serious warning signal for equity bulls. With a current world running on A.I and algorithms, a selloff may look ugly.”
What stocks are in focus?
reported earnings that slightly beat expectations, but the stock fell 1.9%.
reversed early gains and slumped 5.6%. The maker of construction and mining equipment reported first-quarter profit and sales that were well above expectations, but stocks sold off regardless.
gained 3.4% after reporting strong first-quarter results.
rallied 18% after the electronics maker late Monday reported profit and sales above Wall Street estimates.
What economic data are in focus?
The S&P/Case-Shiller national index rose a seasonally adjusted 0.5% and was up 6.3% compared with a year ago in February, hitting a four-year high.
U.S. consumer confidence index rose to 128.7 in April from 127, while new-home sales were at a seasonally adjusted annual rate of 694,000 in March, the Commerce Department said.
What are other markets doing?
Asian markets closed mostly higher, with Chinese stocks getting a lift from the government announcing deeper economic and market reforms.