Stocks closed broadly lower, abandoning their gains from the previous day.
Banks suffered some of the biggest losses as bond yields fell today and energy companies fell alongside a sharp drop in the price of crude oil.
The S&P 500 lost 0.8%. Smaller company shares, which have largely outperformed the rest of the market this year, fell further. The Russell 2000 index returned 3.6%. Falling bond yields hurt banks as they translate into lower interest rates on mortgages and other types of loans.
The benchmark US crude oil price fell 6.2%.
Stocks fell in the afternoon, putting the market on track to return to yesterday’s gains.
The S&P 500 was down 0.9% at 3:34 p.m. EST after losing an early gain. Technology, industrial and healthcare companies accounted for a large portion of sales. Energy stocks also helped push the market down due to falling oil prices.
Bond yields also fell. This has weighed on banks and other financial firms who view bond yields as a benchmark for the interest rates they charge on mortgages and other loans.
The high-tech Nasdaq fell 1.1% while the Dow Jones Industrial Average fell 335 points, or 1.1% to 32,384. Sales were strongest among small businesses, which helped lowers the Russell 2000 index by 3.8%.
Investors continue to focus on the future of the US economy as millions of Americans get vaccinated every day. Investors vacillate between optimism that coronavirus vaccines that could get business and travel back to normal and fears of higher inflation after struggling economies were inundated with credit and spending public.
“The market feels like it’s at this inflection point,” said Darrell Cronk, chief investment officer for Wells Fargo Wealth and Investment Management. “It’s a good day of reflection.”
The price of US crude oil fell 6.2% to $ 57.76 a barrel, pushing energy companies down. Energy prices have been climbing steadily this year until recently, as the global economy recovers and global demand for oil increases while production remains constrained. Marathon Oil fell 6.6%.
Another drop in long-term bond yields led to a drop in bank stocks. When bond yields fall, they translate into lower interest rates on loans such as mortgages and lower profits for banks and other lenders. Bank of America fell 2.1% and Wells Fargo fell 2.10%. American Express slipped 3%.
The yield on the 10-year Treasury bill fell to 1.63%. The yield was well above 1.70% last week, which put some pressure on the stock market.
The S&P 500 hit a pandemic-era low exactly one year ago, on March 23, 2020, after falling nearly 34% in about a month. That wiped out three years of earnings. The index ended up booming in the coming months and recovered all of its losses in August. Until Monday, it had jumped 76% from that low point.
Cronk said there are many signs in the market pointing to an early stage recovery. Interest rates rise as the economy strengthens, commodities like oil grow steadily, and sectors closely linked to economic growth are doing well. “It is going exactly as it should be.”
AstraZeneca fell 3.5% after U.S. officials said data from the drug company’s COVID-19 vaccine trial contained “incomplete” information, which could impact its effectiveness. AstraZeneca vaccine is mainly used in Europe.
A company to watch later will be GameStop, which will release its quarterly results after the closing bell. GameStop was an action of great interest to an online investment community, which took the action to astronomical heights earlier in the year. The stock continues to be extremely volatile, often moving more than 10% on any given day. It was down 5.8% in afternoon trading.
AP business writer Stan Choe contributed.