Tuesday marked the fourth day of losses for stocks. The looming decisions by the Federal Reserve and other central banks and the U.K.’s potential exit from the European Union have sent investors heading for the exits.
Investors also continued their search for safety. Monday’s best-performing sectors were all defensive ones: telecom, utilities and consumer staples. They bought gold, which gained for the fifth consecutive day, up 0.1% at $1,288.10 an ounce. And the U.S. dollar advanced against a basket of currencies.
Mostly, though, safety-seeking investors have seemed to rush into government bonds. This has pushed the yield on the 10-year Treasury note to a three-and-a-half-year low, while Germany’s benchmark bond yield fell below zero for the first time ever.
Retail sales provided a bright spot on Tuesday, with the Commerce Department reporting the increased 0.5% in May.
Sean Lynch, co-head of global equity strategy for the Wells Fargo Investment Institute, told The Wall Street Journal that this should bode well for the U.S. economy and stocks this quarter. What’s more, he said, “If there’s one place in the world where we could put money in, it would be large-cap U.S. stocks.”
At Tuesday’s close, the Dow Jones Industrial Average was off 58 points at 17,675, the S&P 500 fell 4 points to 2,075, the Nasdaq lost 5 points at 4,844, and the Russell 2000 was down 3 points at 1,148.
The NYSE Composite’s primary exchange traded 908 million shares with total volume of 3.7 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 1.9-to-1, and on the Nasdaq, decliners led by 1.5-to-1. Block trades on the NYSE increased to 4,986, up from 4,722 on Monday.
It was only one week ago that the S&P 500 set a new 10-month high at 2,120. On Tuesday, it dropped through the first line of significant support — the 50-day moving average at 2,077 — on average volume.
Below that is the much-discussed line at 2,040, which preciously acted as major resistance. This line is still the most important technical feature on the chart. So far, despite four days down, volume has been relatively light, and breadth and block trades have not caused alarm.
Conclusion
Investors are waiting for the outcome of the Fed’s meeting today. A rate increase would surprise everyone but, more than likely, the meeting will not have a major impact on the market.
The big event now is the Brexit, and even though it’s been known for months that the referendum will occur on June 23, before the polls this week, the possibility did not seem to be taken seriously.
If the U.K. decides to exit the EU, the biggest impact will be on European stocks, global banks and, according to some, military spending. The bigger threat, however, is that if the Brits go, then other European nations may follow.
But most analysts seem to believe that aside from injecting another period of uncertainty into the markets, no real identified costs have been associated with a possible withdrawal.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
