By Riva Gold and Leslie Josephs 

U.S. stocks pared earlier losses, but travel stocks continued to lag the broader market after explosions in Brussels killed dozens in what authorities described as terrorist attacks.

The Dow Jones Industrial Average slipped 31 points, or 0.2%, to 17592. The S&P 500 declined 0.1%, while the Nasdaq Composite added 0.3%.

The Stoxx Europe 600 initially fell more than 1.3% in morning trade before paring losses to 0.5%

Travel and leisure stocks fell sharply after explosions hit Brussels' international airport and a subway station near European Union institutions. Belgian officials shut down the entire public transport network in Brussels and immediately raised the terror alert across the country to its maximum level. Shares in Air France-KLM and Thomas Cook Group PLC fell about 4%.

In the U.S., travel and leisure stocks were among the biggest laggards in the S&P 500. Cruise operator Royal Caribbean Cruises dropped 3.9%, while competitor Carnival fell 3%. Delta Air Lines shares fell 2.1%, while American Airlines Group dropped 1.6%.

Exchange-traded funds that aim to track the travel industry fell more than the broader market. The $184 million PowerShares Dynamic Leisure and Entertainment Portfolio fell 0.8%, while the $54 million US Global Jets ETF, whose index includes airline operators, slipped 0.9%.

"It's hard to say what the long-term impact is, but it's not good," said Sanjiv Shah, chief investment officer at Sun Global Investments. "There are worries about security, the impact on growth, greater restrictions on travel. It's just more uncertainty," he said.

As investors sought safety, gold rose 0.8% to $1,254 an ounce, while the yield on 10-year German and U.S. government bonds fell. Yields fall as prices rise.

The explosions come just days after the arrest of Salah Abdeslam, one of the alleged Paris attackers who was captured in Brussels after a four-month manhunt.

In recent years, financial markets have reacted swiftly to attacks in Western cities before quickly recovering. Markets from equity to bonds and gold were little disrupted by the killing of at least 129 people in Paris last November. Still, losses in the securities of airlines and travel companies tend to linger for longer.

The U.S. market's reaction to the attacks was muted.

"By and large, what I've observed over the past few years, as sad as [terrorist attacks] are ... market has largely grown numb to them and shrugged them off," said Keith Bliss, senior vice president at brokerage Cuttone & Co. "Unless we see another attack on the heels of this or another attack in a major metropolitan center...I don't think the market's going to react."

European bank shares fell Tuesday after Moody's Investors Service said it is reviewing Deutsche Bank AG's credit rating for a possible downgrade, sending shares in the lender down 2.5%.

In currencies, the dollar was down 0.4% against the yen to Yen111.6840, while the euro was down 0.3% against the dollar to $1.1205.

Tuesday's moves came after Wall Street climbed slightly Monday to close at its highest level this year, but trading volume fell to a 2016 low in a holiday-shortened trading week.

Stocks have steadily climbed back from steep losses at the beginning of the year, spurred by improvements in U.S. economic data, a rebound in commodities prices, and a more dovish stance from the Federal Reserve and European Central Bank.

As volatility recedes, investors are now assessing whether the rally has further to go.

"Central banks have created a bit of a buffer for markets, but we think there are still sufficient uncertainties that will keep markets volatile this year," said Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management, pointing to questions around China's economy, commodity prices, and the U.S. labor market going forward.

"We're still very anxious to get into the earnings season," he said, with trade expected to be choppy until investors get a clear sense of corporate performance.

In economic news, the composite purchasing managers index for the eurozone rose in March, beating investors' expectations, while German business sentiment brightened as companies grew more upbeat about the country's outlook.

A reading of the U.S. manufacturing sector this month rose slightly from February.

Despite the recent pickup in data, "We're experiencing a slow growth world, and I can't see that changing," said Gary Greenberg, head of emerging markets at Hermes Investment Management.

The Shanghai Composite Index snapped a seven-session winning streak earlier Tuesday after Chinese authorities tempered a pledge to accelerate the development of China's capital markets and guided the yuan weaker.

Japan's Nikkei Stock Average ended 1.9% higher as it reopened from a holiday.

In commodities, Brent crude rose 0.4% to $41.71 a barrel in a choppy session after swinging between small gains and losses.

Natalia Drozdiak contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Leslie Josephs at leslie.josephs@wsj.com

 

(END) Dow Jones Newswires

March 22, 2016 11:43 ET (15:43 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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