Stocks suffered a rare bout of weakness on Tuesday — the worst loss since Aug. 17 and the first back-to-back declines of more than 0.5% since before Election Day. This snapped an incredible 310 trading day winning streak that beat the next best result — around 160 days in the mid-1990s — by a significant margin.
A combination of bond market weakness, another drop in the U.S. dollar overnight, worry that an announced healthcare initiative involving Amazon.com, Inc. (NASDAQ:AMZN) could punish healthcare sector profits and concern about a bevy of big-tech earnings reports later this week, all weighed on sentiment in a big way.
In the end, the Dow Jones Industrial Average lost 1.4%, the S&P 500 lost 1.4%, the Nasdaq Composite lost 0.9% and the Russell 2000 lost 1%. Treasury bonds fell to push the 10-year yield above 2.7%. The dollar weakened. And both gold and crude oil fell.
AK Steel Holding Corporation (NYSE:AKS) was among the most actively traded, falling 8.9% despite reporting better-than-expected results before the open. Healthcare overall led the decliners, with health insurers down 3%. Drug retailers gained, up 1.1%. Pfizer Inc. (NYSE:PFE) fell 3.1% and Aetna Inc (NYSE:AET) fell 3% after reporting results.
Investors are now looking ahead to President Trump’s first State of the Union address tonight and the Federal Reserve’s next policy announcement on Feb. 1, which will be the last meeting for current chairman Janet Yellen.
Among the chaos and volatility in play today, this probably best summarizes the context for what happened: The opening tick gap down, which was worth more than 0.9%, was the worst start to a session since September 11, 2002. That’s an incredible number given just how historically calm and collected markets have been.
No doubt, this is a massive rude awakening for many.
The ferocity of the decline can be blamed, largely, on the weakness in a single stock: UnitedHealth Group Inc (NYSE:UNH) fell 4.4% today resulting in a loss of about 100 points on the Dow’s opening tick, a consequence of its high per-share-price.
Going forward, much depends on whether the inflation-focused rise in Treasury yields continues — encouraged by the pro-inflation impact of the weakening U.S. dollar. But for now, at the very least, watch for a relief rebound that takes the Dow Jones back to 26,400 before the selloff resumes.
Check out Serge Berger’s Trade of the Day for Jan. 31.
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.
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