By Anora Mahmudova and Carla Mozee, MarketWatch
10-year Treasury yield at 1.9%
NEW YORK (MarketWatch) -- Selling pressure on Wall Street
intensified on Tuesday, sending the S&P 500 below the 2,000
level, as slumping oil prices and weaker-than-expected economic
reports sent investors running for cover.
Tuesday's selling action comes on the heels of a brutal sell-off
on Monday, which saw the closely watched Dow Jones Industrial
Average shed 331 points.
Investors were scouring for safe industries such as utilities as
well as U.S. Treasurys, pushing yields to the lowest levels since
the Oct.15 mini-flash crash.
The S&P 500 (SPX) fell Tuesday, with only one sector
remaining in the green -- utilities. Large-cap energy sector
stocks, which fell 4% on Monday, slumped more than 1.5% again.
The sector is down 22% since the June 30, 2014 close, while the
S&P Small Cap 600 energy sector has lost nearly half of its
value in that time, according to Howard Silverblatt, senior index
analyst at S&P Dow Jones Indices.
The Dow Jones Industrial Average (DJI) was on track for another
triple-digit loss. The Nasdaq Composite (RIXF) was on track to
record its fifth-straight day of declines.
Randy Frederick, managing director of trading and derivatives at
the Schwab Center for Financial Research, noted that big down moves
in oil continued to spook investors despite the longer-term
benefits of lower energy prices.
"Markets are overdue for a correction, but so far selling has
been measured and not at panic levels. At the moment there are many
factors that are weighing on markets, from Greece's potential exit
from euro to possible actions by the Fed, which will struggle to
raise rates in current environment of falling inflation," Frederick
said.
He added that the Vix index must hit 30 before the market
reaches panic levels. The Vix, known as Wall Street's fear gauge,
is up 13% at 22.
Kate Warne, investment strategist at Edward Jones, said that
Monday's selloff was an overreaction to uncertainty surrounding the
eurozone economy as Greece looks likely to exit the union, while a
slide in oil prices stoked further worries about stagnating global
economic growth outside of the U.S.
"In the long-term, lower oil prices is a positive to major
economies, but until oil finds a bottom, there will be short-term
fear over global growth," Warne said.
In economic news, companies in the U.S. service sector such as
retail and real estate grew at a slower but still-healthy pace in
December, according to a survey of senior executives. Orders for
goods produced in U.S. factories fell 0.7% in November, hit by
transportation equipment, matching the forecast from
MarketWatch-polled economists, according to government data
released Tuesday.
Analysts said that investors are wary of making big bets ahead
of the important jobs report on Friday, which will shed light on
how well the U.S. economy is performing amid global weakness.
Crude-oil prices extended losses on Tuesday, with U.S. oil
futures (CLG5) down 4%, trading just below $48 a barrel. Brent
futures were down 3.6% at $51 a barrel.
"The economic conditions that oil faces continue to be
aggressively against the commodity, making buyers extremely
hesitant to even consider entering long positions," said Jameel
Ahmad, chief market analyst at FXTM, in a Tuesday note. "There are
also suspicions that as oil companies struggle to adapt to lower
profits, there could be mergers and acquisitions taking place in
the future, and this will weigh on investor sentiment. What's the
answer to this equation? Bearish moves for oil."
Stocks to Watch: Verizon Communications Inc. (VZ) has approached
AOL Inc.(AOL) about a possible acquisition or joint venture,
Bloomberg reported Monday, citing people with knowledge of the
matter. Shares in AOL jumped.
Cyberonics Inc.(CYBX) shares fell after the medical-device maker
said an appeals board supported a 2007 decision by the Centers for
Medicare and Medicaid that denied coverage of the company's
pacemaker-like device for treating depression.
Coach Inc. (COH) shares were up slightly after the company said
it's buying luxury footwear brand Stuart Weitzman from private
equity firm Sycamore Partners, in a deal valued at up to $574
million.
Nielsen N.V. (NLSN) shares fell after financial-news network
CNBC said it will no longer rely on the TV-ratings specialist to
measure its daytime audience, beginning later this year.
(Read more: Movers & Shakers column
http://www.marketwatch.com/story/cyberonics-micron-shares-in-focus-tuesday-2015-01-06.).
Other markets: Meanwhile, the yield on the 10-year Treasury fell
13 basis points to 1.9%, according to Tradeweb. Long-term Treasury
yields have been hitting lows not seen in almost two years,
ignoring the mini flash-crash in mid-October -- an indication that
investors are looking to bonds as a safe haven.
In Asia, the Nikkei fell 3% to post its biggest one-day loss in
nearly 10 months, and Indian shares plummeted 3.1%, their steepest
loss since September 2013. European stocks closed lower.
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