Yield on 10-year bond continues to creep higher
U.S. stocks sold off for a second straight session on Tuesday, weighed down by heavy losses in health-care and energy shares.
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The Dow Jones Industrial Average was down as much as 400 points after Amazon, Berkshire Hathaway and JPMorgan Chase announced they would partner in an effort to cut health care costs and improve services for U.S. employees. The announcement sent shares of several health care companies sharply lower.
Meanwhile, climbing U.S. bond yields, which imply a rise in borrowing costs, were also weighing on stocks in a repeat of Monday's action.
Investors are looking ahead to the State of the Union address by President Donald Trump, while a busy day for corporate earnings saw results from big names such as McDonalds Corp. and Pfizer Inc.
What are stock futures doing?
The Dow Jones Industrial Average dropped 380 points, or 1.4%, to 26,066 with nearly all of the 30 components trading lower. Market internals showed broad-based selling, but nothing that approached panic levels (http://www.marketwatch.com/story/stock-market-internals-show-broad-selling-but-nowhere-near-panic-levels-2018-01-30). Pfizer Inc and UntiedHealth Group Inc were leading the losses, down about 4%.
The S&P 500 fell 31 points, or 1.1%, to 2,822 building on the previous day's losses, when the index suffered its biggest drop of the year so far on Monday (http://www.marketwatch.com/story/us-stocks-set-to-ease-back-from-records-ahead-of-blockbuster-week-2018-01-29).
The Nasdaq Composite Index declined 77 points, or 1%, to 7,389.
What are the drivers for the markets?
Higher borrowing costs, which weighed on stocks Monday, showed no signs of letting up. Rising bond yields can crimp demand for assets perceived as riskier, such as stocks, particularly when those yields are higher than those of equities.
On Monday, the yield on the benchmark 10-year Treasury shot to 2.695% (http://www.marketwatch.com/story/10-year-treasury-yield-trades-above-27-highest-since-april-2014-2018-01-29), its highest level since April 2014, having touched an intraday high of 2.727%. The yield remained above the 2.7% level on Tuesday.
Politics and economics may provide a catalyst for investors, with Trump set to deliver his State of the Union address at 9 p.m. Eastern Time. Ahead of that, the Federal Reserve will begin its two-day policy meeting.
See:How the stock market has reacted to State of the Union speeches (http://www.marketwatch.com/story/how-the-stock-market-has-reacted-to-state-of-the-union-speeches-2018-01-23)
(http://www.marketwatch.com/story/how-the-stock-market-has-reacted-to-state-of-the-union-speeches-2018-01-23)Read:Trump adviser Hassett talks up tax law and stock market ahead of State of the Union (http://www.marketwatch.com/story/ahead-of-state-of-the-union-hassett-talks-up-tax-law-and-stock-market-2018-01-29)
This week's earnings rollout, with over 100 S&P 500 names due to report, kicked off in earnest on Tuesday. However, some of the biggest names will come later in the week. Facebook Inc. (FB) is set to report Wednesday, while Apple Inc.(AAPL), Google parent Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN) are all expected on Thursday.
Plus: Earnings previews for Apple (http://www.marketwatch.com/story/apple-earnings-forget-taxes-and-batteries-the-1000-iphone-x-remains-the-story-2018-01-26) (http://www.marketwatch.com/story/apple-earnings-forget-taxes-and-batteries-the-1000-iphone-x-remains-the-story-2018-01-26) (http://www.marketwatch.com/story/apple-earnings-forget-taxes-and-batteries-the-1000-iphone-x-remains-the-story-2018-01-26) (http://www.marketwatch.com/story/apple-earnings-forget-taxes-and-batteries-the-1000-iphone-x-remains-the-story-2018-01-26) (http://www.marketwatch.com/story/apple-earnings-forget-taxes-and-batteries-the-1000-iphone-x-remains-the-story-2018-01-26), Facebook (http://www.marketwatch.com/story/facebook-earnings-how-will-news-feed-changes-impact-revenue-2018-01-26), Alibaba (), AMD (http://www.marketwatch.com/story/amd-earnings-mining-for-crypto-gold-more-spectre-details-2018-01-26) (http://www.marketwatch.com/story/amd-earnings-mining-for-crypto-gold-more-spectre-details-2018-01-26), Alphabet (http://www.marketwatch.com/story/alphabet-earnings-google-hardware-push-should-boost-non-advertising-business-2018-01-29) (http://www.marketwatch.com/story/alphabet-earnings-google-hardware-push-should-boost-non-advertising-business-2018-01-29) (http://www.marketwatch.com/story/alphabet-earnings-google-hardware-push-should-boost-non-advertising-business-2018-01-29), Qualcomm (http://www.marketwatch.com/story/qualcomm-earnings-last-peek-before-investors-decide-fate-of-standalone-company-2018-01-29)
What are strategists saying?
"Concerns are starting to enter the market that inflation could be catching up and higher interest rates could pour cold water on the bull run," said Jasper Lawler, head of research at London Capital Group, in a note. "Higher costs of borrowing could potentially put those companies under pressure, which have been relying on cheap money to grow."
"Despite the hiccup in the market, the bigger picture remains positive: the economy is finally growing faster than in the previous nine years and businesses, especially job-creating small businesses are doing well," Karyn Cavanaugh, senior market strategist at Voya Financial.
"The selloff in health-care stocks is overblown. Maybe the industry will have to be smaller because everyone else is trying to reign in health-care costs, but ultimately, that's a plus for consumers," Cavanaugh said.
What's on the economic docket?
Home prices continue to surge (http://www.marketwatch.com/story/home-prices-accelerated-in-november-case-shiller-shows-2018-01-30) well ahead of inflation and wage gains. The S&P/Case-Shiller 20-city index rose a seasonally adjusted 0.7% in November, and 6.2% for the year.
Consumer confidence (http://www.marketwatch.com/story/consumers-very-confident-in-economy-but-uncertain-how-tax-plan-will-effect-them-2018-01-30)rebounded in the first month of the new year, climbing to 125.4 in January from a revised 123.1 at the end of 2017.
Plus:U.S. economy to keep on truckin' in early 2018 despite cold snap, hiring drop-off (http://www.marketwatch.com/story/us-economy-keeps-on-truckin-in-early-2018-despite-cold-snap-hiring-dropoff-2018-01-21)
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
Which stocks look like key movers?
Shares of Dow component UnitedHealth Group (UNH) dropped 3% following the announcement by Amazon (AMZN), Berkshire (BRKA) and JPMorgan Chase (JPM) that they would partner in an effort to cut health care costs and improve services for U.S. employees. Pharmacy-benefit managers, pharmacy chains and drug distributors (http://www.marketwatch.com/story/health-care-company-shares-drop-sharply-on-entry-by-amazon-berkshire-hathaway-and-jpmorgan-2018-01-30) were also hit in premarket action. The SPDR Health Care Select Sector ETF (XLV) dropped more than 2%.
Harley-Davidson Inc.(HOG) shares tumbled 7% after the motorcycle maker posted a sales drop. Pfizer Inc.(PFE) gave up early gains to trade 4% lower even as the pharmaceutical group posted stronger-than-expected earnings. Aetna Inc.(AET) fell nearly 3% after the insurer reported results.
McDonald's Corp.(MCD) reported earnings that beat estimates but shares were still down 1.3%. Corning Inc.(GLW) shares fell 2.6% after earnings results.
Electronic Arts Inc.(EA) will report after the regular close of markets.
Apple shares slipped nearly 1%, after The Wall Street Journal reported (https://www.wsj.com/articles/apple-to-curtail-iphone-x-production-in-the-face-of-weak-demand-1517312098), citing sources, that the company is cutting production for the iPhone X for the quarter ending March 31. A similar report in the Nikkei Asian Review weighed on shares Monday.
Read: The Apple iPhone-production slowdown story is back again (http://www.marketwatch.com/story/apple-iphone-production-slowdown-this-happens-every-year-and-hits-stock-every-time-2018-01-29)
MetLife Inc.(MET) shares sank 8.9% after the insurer said Monday that it will postpone earnings and revise prior financial reports (http://www.marketwatch.com/story/metlife-shares-sink-after-postponing-earnings-due-to-unpaid-pensions-2018-01-29) over unpaid pensions.
Opinion:13 stocks these winning stock pickers recommend now (http://www.marketwatch.com/story/13-stocks-these-winning-stockpickers-recommend-now-2018-01-30)
(http://www.marketwatch.com/story/13-stocks-these-winning-stockpickers-recommend-now-2018-01-30)Read:Steve Wozniak says he doesn't trust Elon Musk or Tesla anymore (http://www.marketwatch.com/story/steve-wozniak-says-he-doesnt-trust-elon-musk-or-tesla-anymore-2018-01-29)
What are other markets doing?
Monday's Wall Street selloff echoed around the globe, as European stocks lost ground (http://www.marketwatch.com/story/european-stocks-track-wall-street-lower-as-bond-selloff-prompts-caution-2018-01-30) and Asian equity markets came under pressure (http://www.marketwatch.com/story/asia-pacific-markets-slide-after-wall-street-stumbles-2018-01-29) Tuesday.
The ICE U.S. Dollar Index erased an earlier gain (http://www.marketwatch.com/story/dollar-pulls-back-on-turnaround-tuesday-as-10-year-treasury-yield-slips-below-27-2018-01-30)and fell 0.1% to 89.253, while gold futures slid $4.60 to $1,335.70 an ounce.
Oil futures lost nearly 2% (http://www.marketwatch.com/story/oil-prices-fall-as-fear-of-us-oversupply-grows-2018-01-30) to trade near $64.35 a barrel.
Bitcoin prices dropped 11% (http://www.marketwatch.com/story/bitcoin-ether-drop-as-cryptocurrency-rules-go-live-in-south-korea-2018-01-30) to around $9,876.
(END) Dow Jones Newswires
January 30, 2018 13:20 ET (18:20 GMT)
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