Tech and health care lead USA stocks lower

Andrew Cummings
May 16, 2018

The yield on the 10-year Treasury note spiked to a almost seven-year high Tuesday, causing selling in stocks and in particular the ones most sensitive to interest rates. The Dow Jones Industrial Average lost 193.07 points, or 0.8%, to 24,706.34, putting an end to a 8-day rally, the longest since last September. USA shares were set to drift slightly lower, with Dow futures down 0.4 percent and S&P 500 futures 0.3 percent lower. The Nasdaq composite climbed 32 points, or 0.4 percent, to 7,435. The Dow is on track for a gain of 2.2 percent, while the S&P 500 is closing in on a gain of 2.4 percent. Essex Property Trust fell 3 percent to $234.69.

WINTER BLUES: Home Depot dropped 1.4 percent to $188.36 after the home-improvement retailer reported weaker-than-expected sales, partly because of inclement weather, and said the second quarter got off to a slow start.

The health care (-1.3%) and tech (-1%) sectors also suffered large losses, while energy (+0.1%) was the only gainer, as June WTI crude settled 0.5% higher at $71.31/bbl.

BOND YIELDS: Bond prices fell.

The yield curve steepened from near its flattest levels since 2007, with the spread between the 2 year and 10 year bond yields widening 5bps to 50bps.

The S&P 500 rose 9 points, or 0.3 percent, to 2,736.

Bond prices fell, sending yields higher, after the government reported a solid increase in US retail sales last month.

Declining issues outnumbered advancing ones on the NYSE by a 1.87-to-1 ratio; on Nasdaq, a 1.14-to-1 ratio favored decliners. NXP's share price rose by 11.9% and Qualcomm added 2.7% to its value.

Benchmark US crude oil reversed an early side, rising 35 cents to settle at $71.31 a barrel in NY. Brent crude, used to price global oil, gained 77 cents to $79.00 a barrel in London.

The dollar rose to 110.38 yen from 109.66 yen late Monday. Nvidia fell 4.4 percent to $244.13.

The greenback's gains weighed on precious metals prices. Williams said he thought the "new normal" for the neutral rate was around 2.5% (he added that he didn't expect the fiscal stimulus to have any more than a 0.25% impact on neutral) while Kaplan put it in a range of 2.5-3%.

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