U.S. equities moved lower on Tuesday as traders returned from the long holiday break. Rallies in safe haven assets like precious metals and government bonds continued — moves that cast doubt on last week’s big stock market rebound — on concerns about the Italian banking sector and the fallout from the Brexit vote two weeks ago.
In the end, the Dow Jones Industrial Average lost 0.6%, the S&P 500 lost 0.7%, the Nasdaq Composite fell 0.8% and the Russell 2000 finished the day 1.5% lower. Treasury bonds were stronger, the dollar was weaker against the yen, gold gained 1.5% to reach its highest level since March 2014 and crude oil lost 4.5% to close at $46.77 a barrel.
Energy was hit by a number of headwinds including building inventory levels, a Bloomberg OPEC survey showing rising production as Nigerian supply bounces back and the avoidance of a labor strike in Norway.
The drop in energy boosted the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a near 10% gain. Silver has surged to levels not seen since August 2014, boosting the July $17 calls in the iShares Silver Trust (ETF) (NYSEARCA:SLV) recommended to Edge Pro subscribers to a gain of 371%.
Eight of the ten major sectors traded lower, with energy and materials leading the way down with losses of 1.9%. Defensive utility stocks were the bright spot, rising 0.7%.
Netflix, Inc. (NASDAQ:NFLX) gained 1.3% after Recode reported Comcast Corporation (NASDAQ:CMCSA) would allow the company to stream content onto its X1 platform. Tesla Motors Inc (NASDAQ:TSLA) dropped 1.2% after reporting second-quarter deliveries 15% below guidance.
Apple Inc. (NASDAQ:AAPL) supplier Skyworks Solutions Inc (NASDAQ:SWKS) dropped 6% after being downgraded by analysts at KeyBanc on findings from Asian supply chain checks that indicate the potential for a 15% to 20% decline in iPhone 7 shipments in the second half.
Turning to Europe, Brexit and Italian banking concerns were the focus. U.K. fund manager Standard Life suspended trading to keep investors from selling out of its $3.8 billion commercial property fund, the third largest open-ended fund of its type in Britain. Aviva and M&G subsequently suspended trading in their property funds as well. All of this is an echo of the lead up to the 2007 property crash in which investor redemptions into a weak market forced property sales, deepening the decline.
In Italy, the prime minister is threatening to ignore European Union banking rules and put more than $40 billion into the Italian banking system if needed after his previous intervention ideas were rejected by Brussels and Germany.
Watch for the weakness to persist as traders look ahead to the start of the second-quarter earnings season on July 11 and the approach of the July Federal Reserve policy meeting. San Francisco Fed President Williams said today that the U.S. economic outlook has not changed much as a result of Brexit and that a rate hike would be appropriate this year if thing remain stable.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
