U.S. stocks were lower on Tuesday morning, dragged down by Apple, as investors anxious about China’s economic health and braced for an interest rate hike by the Federal Reserve next month.
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S&P futures ESZ5, -0.08% declined by 4.65 points, or 0.2%, to 2,068.25, while Dow Jones Industrial Average YMZ5, -0.92% futures shed 42 points, or 0.2%, to 17,633. The Standard & Poor’s 500 index declined 20 points, or 0.9 percent, to 2,079 and the Nasdaq composite fell 44 points, or 0.9 percent, to 5,103. The tech-heavy Nasdaq composite was sporting even larger losses, down 0.5%.
The energy sector was the worst-hit among the S&P sectors, falling 1.45 percent after a fall in oil prices.
“Markets came too far too fast moving in a straight line over the last six weeks and took away the bargains”.
U.S. companies face the prospect of higher borrowing costs if the Federal Reserve raises interest rates next month, as is widely expected after Friday’s strong jobs report.
“The Fed is going to have to be super careful in raising rates in December if data continues to be soft”, said Peter Cardillo, chief market economist at Rockwell Global Capital.
U.S. Treasuries prices rose, with benchmark yields retreating from a more than three-month peak on demand from investors seeking bargains after a market selloff on worries about the Fed raising rates in December.
On the other hand, higher US interest rates make parking funds in the dollar more attractive than at present, especially as a few of the dollar’s major rivals like the euro have negative interest rates. The unemployment rate also dropped to 5 percent, the lowest in seven years. Weyerhaeuser fell 2.96%.
Significant strength was also visible among trucking and commercial real estate stocks, with the Dow Jones Trucking Index and the Morgan Stanley REIT Index climbing by 1.2 percent and 1.1 percent, respectively.
Data on Tuesday showed persisting deflationary pressure in China and followed disappointing trade data over the weekend. Such stocks can be expected to outperform when markets rise and underperform when they fall.
“We’ve known about China’s issues for a while now, but this will likely lead to the government doing more stimulus”, said Quincy Krosby, market strategist with Prudential Financial.
Apple suppliers Skyworks, Avago, Cirrus Logic and Qorvo were down between 3.7 percent and 7.0 percent.
Among individual companies, travel site Priceline fell $138.75, or 9.6 percent, to $1,311.15 after the company’s outlook for the fourth quarter, a typically strong period for travel companies, came up short of analysts’ expectations. On the Nasdaq, 1,964 issues fell and 849 advanced.
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In commodities, Brent crude was 0.1% weaker at $47.12 a barrel, while gold was 0.3% higher at $1,091.10.
