Indices log their worst daily drops since September 2016
U.S. stocks sank on Tuesday, 21 March 2017 as the Dow and the Nasdaq logged their worst daily drops since September 2016, while the S&P 500 also tumbled the most in a single session in five months.
The Dow Jones Industrial Average fell 237.85 points, or 1.1%, to close at 20,668.01, the biggest percentage decline since blue chips fell by 1.4% in mid Sept 16. The S&P 500 shed 29.45 points, or 1.2%, to end at 2,344.02, and the Nasdaq fell 107.70 points, or 1.8%, to finish at 5,793.83.
Investors attempted to make the most out of some positive overnight developments on Tuesday morning. The financial sector tumbled deep into negative territory on Tuesday, signaling the possible end of the new administration's honeymoon phase. The reversal of fortune had its roots in the inverse relationship between the yield curve and the banks. The cyclical sectors also absorbed the worst of the selling pressure with the consumer discretionary, industrials, materials, and technology sectors closing lower between 1.2% and 1.7%.
Counter cyclical groups outperformed amid the day's risk-off sentiment with the rate-sensitive utilities sector closing atop the day's leader board.
Like its defensive peers, the health care sector also outperformed the broader market, but it showed relative weakness within the counter cyclical space as the debate on health care reform picked up steam in Washington. The GOP's proposed health care legislation will go the floor of the House on Thursday, but reports indicate that the Republicans will not have enough votes to move the bill to the Senate. Investors will keep their fingers crossed, hoping that a resolution can be worked out in the nation's capital so that lawmakers can move on to tax reform--another promise that has propped up the stock market.
The benchmark 10-yr yield finished Tuesday's session three basis points lower at 2.43%.
The ICE U.S. Dollar Index which measures the greenback's strength against a basket of six currencies, dropped 0.7% after touching its lowest levels since late January. Weakness in the greenback has helped to provide support for dollar-denominated commodity prices. The dollar was particularly weak versus the euro which rallied in the wake of France's televised first presidential debate. The greenback was also sharply lower against the British pound as Britain was set to notify the European Union on March 29 that it will start the process of exiting itself from the bloc.
Tuesday's lone economic report was fourth quarter Current Account Balance. The current account deficit for the four quarter totaled $112.4 billion while the consensus expected the deficit to hit $128.2 billion. The third quarter deficit was revised to $116.0 billion from $113.0 billion.
Bullion prices ended higher at Comex on Tuesday, 21 March 2017. Gold prices settled Tuesday at their highest level in nearly three weeks, with gains fueled by a drop in the U.S. dollar as traders eyed the presidential race in France and the U.K. prepared its exit from the European Union.
April gold rose $12.50, or 1%, to settle at $1,246.50 an ounce, with prices up a fourth straight session to settle at the highest level since March 1.
May silver added 0.8%, at $17.583 an ounce.
Oil prices settled lower on Tuesday, 21 March 2017 in volatile trading tied to the expiration of the April futures contracts, ahead of data expected to reveal a rise in weekly U.S. crude supplies. Traders also kept an eye out for hints on whether the Organization of the Petroleum Exporting Countries will extend the production-cut agreement between its members and other major producers beyond June. OPEC sources have indicated that members increasingly favor an extension but want the backing of non-OPEC oil producers, which have yet to deliver fully on existing cuts.
April West Texas Intermediate crude declined by 88 cents, or 1.8%, to settle at $47.34 a barrel on the New York Mercantile Exchange. The contract, which expired at the settlement, finish at their lowest level since November. May WTI which is now the front-month contract, shed 67 cents, or 1.4%, to finish at $48.24 a barrel. May Brent crude lost 66 cents, or 1.3%, to $50.96 a barrel on the ICE Futures exchange in London.
On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET, January FHFA Housing Price Index at 9:00 ET, and February Existing Home Sales (consensus 5.54 million) at 10:00 ET.
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