U.S. stocks bounced off lows Wednesday but still traded in negative territory as health care and utilities shares weighed on the market while sentiment remained sensitive to signs of slowing global growth.
Investors also sought to unravel the implications of falling bond yields on the heels of increasingly dovish central banks around the world.
How are benchmarks faring?
The Dow Jones Industrial Average
DJIA, -0.16%
dropped 17 points to 25,640, while the S&P 500 index
SPX, -0.43%
was off 9 points, or 0.3%, to 2,809 with health care and utilities among the worst losers. The tech-laden Nasdaq Composite Index
COMP, -0.65%
fell 38 points, or 0.5%, to 7,652.
At its highs Wednesday morning, the Dow had gained 100 points, the S&P 500 added 7 points, while the Nasdaq had advanced 21 points.
What’s driving the market
Demand for bonds remained strong, pushing yields on longer-term government debt to levels not seen in more than a year. Apprehension over softer growth in Europe and China fueled appetite for bonds, particularly after the eurozone’s top central banker voiced concerns over the effects of negative interest rates, a policy the European Central Bank introduced nearly five years ago. Those comments came after the ECB lowered its forecast for eurozone gross domestic product this year to 1.1% from 1.7% and announced a fresh round of bank stimulus several weeks ago.
The U.S. trade deficit narrowed in January to a five-month low of $51.1 billion versus $59.9 billion in December. Economists polled by MarketWatch predicted a $57.7 billion shortfall.
Data from China’s National Bureau of Statistics, meanwhile, showed that profits at industrial firms fell by 14% in January and February, the largest decline since 2011.
Eroding confidence in the economic outlook across the globe also compelled the Federal Reserve to lower domestic growth expectations for 2019 to 2.1% from 2.3% at its policy gathering earlier this month.
Newfound dovishness from central banks and the weaker-than-expected data have come as the 10-year Treasury yield
TMUBMUSD10Y, -1.79%
fell below that of three-month bill, a phenomenon that is often viewed as an accurate indicator of coming recessions in the next 12 to 24 months, which, in turn, has raised anxieties on Wall Street. Recently, the 10-year yield was at 2.38%, falling further toward its lowest level since December of 2017 and deepening its inversion against the 3-month T-bill yielding 2.46%.
An inversion is a condition in which rates for shorter-dated government debt rise above rates for its longer-dated counterparts. The inversion between the three-month and the 10-year, which first took hold on Friday, was the first such since 2007.
Check out: Stock market often produces strongest returns after yield curve inverts: JPM’s Kolanovic
In the U.K., Theresa May is staking her premiership on Brexit after she said she would quit if the deal that she supports is passed, according to The Wall Street Journal.
Brexit negotiations have been a key focus for investors as a disorderly exit has the potential to rock global markets.
Read: Brexit Brief: MPs prepare to vote on Brexit options
What are strategists saying?
“We’re in a period of consolidation as investors digest what is clearly a slowdown in the global economy and yet a very sharp shift in global central bank policy, led by the Fed,” said Carlos Dominguez, chief investment officer at Element Pointe Advisors in an interview.
“We think there is very strong support somewhere in the 2,700 range for the S&P 500, but we think the upside is somewhat capped until uncertainties like the China trade situation and Brexit are resolved.”
“Stock performance is caught in a tug of war that’s left equities increasingly range bound and volatile,” wrote Alec Young, managing director of global markets research at FTSE Russell in an email. “Downside has been limited by increasingly dovish central bank guidance while upside is capped by plunging bond yields, curve inversion jitters and mounting evidence of weaker global growth.”
What stocks are in focus
Shares of Centene Corp.
CNC, -7.16%
fell 7% after the insurer announced plans to purchase managed-care provider WellCare Health Plans Inc.
WCG, +9.85%
in deal valued at $17.3 billion, including debt. WellCare shares jumped 10%.
Shares of Southwest Airlines Co.
LUV, +2.44%
bounced back from early losses to rise 2.6%. The air carrier cut its first-quarter unit revenue and capacity guidance and raised its costs outlook, citing the negative impacts of the government shutdown of Boeing’s 737 MAX 8 aircraft.
Lennar Corp.
LEN, +4.58%
shares gained 4.9% as investors shrugged off the home builder reporting fiscal first-quarter profit, revenue and deliveries that missed expectations.
Shares of KB Home
KBH, +1.45%
rose 2.7% after the home builder reported earnings that beat analysts estimates while revenue fell short.
What are other markets doing?
European equity markets were slightly higher, with the Stoxx 600 Europe index
SXXP, +0.02%
edging up about 0.1%. China’s stock markets closed lower, while Japan’s Nikkei
NIK, -0.23%
fell 0.2%, and Hong Kong’s Hang Seng Index
HSI, +0.56%
advanced 0.6%.
In commodities markets, crude-oil prices
CLK9, -0.93%
were in retreat, while gold prices
GCJ9, -0.37%
settled lower, and the U.S. dollar
DXY, +0.06%
traded slightly higher.
—Mark DeCambre contributed to this article
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Source : MTV
