- Stocks opened lower on Tuesday, putting the market on track for its weakest two-day performance in six months.
- This represents a pause from the recent rallies to all-time highs that some strategists have described as “parabolic.”
- A decline in healthcare stocks, and concerns about rising Treasury yields, were among the drivers of the sell-off.
The major US stock indexes opened lower on Tuesday following the market’s weakest trading session so far of 2018.
If Tuesday ends up anything like Monday, it could mark stocks’ weakest two-day performance in six months, representing a pause from the breakneck speed at which they have achieved all-time highs.
The move lower this week is being attributed to the bond-market market sell-off, which has taken the benchmark 10-year Treasury yield above 2.7%, its highest level in nearly four years.
“Given the market’s recent strength, it is not surprising that investors have become increasingly uneasy with the rise in interest rates and the potential for future inflation,” said Jonathan Golub, the chief US equity strategist at Credit Suisse, in a note on Monday. Higher rates typically concern equity investors because they increase borrowing costs for companies.
Healthcare stocks also added to the market’s weakness on Tuesday, after Amazon, Berkshire Hathaway, and JPMorgan announced plans to create a new business that would provide their US employees healthcare at a “reasonable” cost. UnitedHealth was the biggest decliner on the Dow Jones industrial average, down by nearly 5% and subtracting about 80 points from the index.
At 10:07 a.m. ET, the Dow was down 322 points, or 1.22%. The S&P 500 was down 33 points (-1.18%), and the Nasdaq was down 91 points (1.23%).
The rise in bond yields is improving their attractiveness relative to stocks, which many investors consider overvalued, said Mike van Dulken, the head of research at Accendo Markets. This is “stoking fear of a market reversal in the two asset classes following a 30-year bull market in the former and a Trump-inspired climb for the latter,” he said.
The drop in stocks comes during a week packed with key news for investors.
President Donald Trump delivers his first State of the Union address on Tuesday. Federal Reserve Chair Janet Yellen presides over her final policy meeting on Tuesday and Wednesday. And on Friday, the jobs report is forecast to show that average hourly earnings increased year-over-year, according to economists polled by Bloomberg.
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