The main Wall Street indexes ended Tuesday’s trading session with declines after bond yields slumped, indicating for alarm over the US-China trade war and a possible slowdown in the global economy.
The blue-chip index Dow Jones Industrial Average wiped out 237.32 points, or 0.93%, ending the day at 25,348.37 points. The broader benchmark S&P 500 dropped by 0.84% to 2,802.19 points. The technology index Nasdaq Composite recorded a decline of 0.39% to 7,607.35 points.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 10.41% to 17.50.
The US financial markets were closed on Monday for Memorial Day. Stocks ended higher Friday but booked losses for the week, extending the Dow’s weekly losing streak to five, its longest since June 2011. The Dow saw a 0.7% weekly fall, while the S&P 500 logged a 1.2% retreat and the Nasdaq Composite gave up 2.3%. The major indexes remain solidly higher for the year to date but have retreated significantly in May as US-China trade tensions have heated up. Washington and Beijing have engaged in a round of tit-for-tat tariff escalations, while the Trump administration has moved to blacklist US exports to Chinese telecom-equipment firm Huawei Technologies Co, prompting threats of further retaliation by China.
On the bond markets, the yield on the benchmark 10-year note fell to around 2.26%, its lowest level in 19 months. Yields move inversely to prices. Meanwhile, the return on 30-year US Treasuries fell to 2.707%.
The fall in bond yields can make mortgages and many other types of loans cheaper, but this also brings an alarming signal to the stock markets.
Corporate stocks performance
Shares of banking companies fell due to the lower yields on government bonds. Goldman Sachs, Citigroup and JPMorgan Chase declined by 1.7%, 0.6%, and 0.8%, respectively.
The stocks of Morgan Stanley and Wells Fargo also declined.
The fall in bank stocks and interest rates happened just hours after US President Donald Trump said that “the United States is still not ready for a deal” with China.
The shares of the US microprocessor manufacturers The VanEck Vectors Semiconductor and Micron Technology declined by 0.7% and 3% respectively.
Fiat Chrysler shares rose more than 7% on an announcement it is seeking a merger with French automaker Renault. Meanwhile, Total Systems Services rose more than 4% after agreeing to merge with Global Payments.
The shares of FedEx dropped by 0.9% after Reuters reported that Huawei was reviewing its relationship with the company after it claimed that the logistics giant rerouted packages destined for Huawei addresses in Asia to the US.
The stocks of Advanced Micro Devices (AMD) added 9.8% during the trading session after announced its third generation of AMD Ryzen desktop processors, including what it called the “highest performance 12 core desktop processor ever”, the Ryzen 9 3900X CPU.
However, the shares in Kraft Heinz Co fell to 5-year lows, wiping out 6.59%, seemed to be caught in a downdraft that also saw shares of Mondelez International, J.M. Smucker, Kellogg, and Campbell Soup all trading lower.
The stocks of Kezar Life Sciences Inc fell to all-time lows, losing 41.39%.
The top performers on the S&P 500 were Advanced Micro Devices Inc (+9.8%), Total System Services Inc (+4.75%) and Activision Blizzard Inc (+2.86%), while on the flip side were Kraft Heinz Co (-6.59%), Pacific Gas & Electric Co (-5.84%) and Perrigo Company PLC (-5.7%).
Corporate earnings reports
the US aerospace and electronics company HEICO Corporation reported that net income increased 37% to a record 81.8 million USD, or 0.60 USD per diluted share, in the second quarter of fiscal 2019, up from 59.6 million USD, or 0.44 USD per diluted share, in the second quarter of fiscal 2018. In the first six months of fiscal 2019, the company’s net income increased 29% to a record 161.1 million USD or 1.18 USD per diluted share. Operating income increased 30% to a record 119.2 million USD in the second quarter of fiscal 2019, while the consolidated operating margin improved to 23.1% in the second quarter of fiscal 2019, up from 21.3% YoY. The net sales increased 20% to a record 515.6 million USD and the EBITDA rose by 29% to 142.2 million USD.
Bank of Nova Scotia reported earnings that missed analysts’ estimates as higher provisions for loan losses tied mainly to takeovers hurt results in the fiscal second quarter. Canada’s third-largest lender by assets set aside more money for soured loans in its Canadian banking and international divisions, leading to a 63% jump in provisions across the bank. Provisions for credit losses were higher than analysts’ estimates at 873 million USD, including 151 million USD tied to takeovers in Peru and the Dominican Republic. The net income for the three months through April 30 rose by 3.8% to 2.26 billion USD, or 1.73 USD per share, with adjusted per-share earnings of 1.70 USD missing analysts’ estimates by four cents.