US stocks closed soft on Tuesday after Brexit headwinds and weaker oil prices made it impossible for prices to dig out of their hole.
The market bellwether S&P 500 closed down 0.7% at 2,088 – their lowest level in a week.
But outside of the blue-chips, the losses were larger. The S&P Midcap 400 closed 1.2% lower at 1,482, while the S&P Smallcap 6000 was down 1.4% at 700.
The wider small-cap Russell 2000 closed down 1.5% at 1,139.
But it wasn’t just a direct hit from Brexit, the UK’s shock referendum result to quit the European Union last month, which was all Wall Street’s undoing.
Oil prices also came off sharply in response to a stronger dollar while sterling hit a fresh 1985 low of $1.30. That put pressure on oil prices and the West Texas Intermediate came off 4.4% to $46.84.
Midsession
US stocks were bruised at midsession on Tuesday, after the UK’s Brexit vote once more haunted assets including sharply depressed oil prices.
The third quarter may have started well last Friday as the market bellwether S&P 500 index jumped to its highest levels seen since August 2015. But after Monday’s break for the US July 4 Independence Day holiday, the market wasn’t ready to celebrate Britain’s declaration of independence from the European Union quite so positively.
The S&P 500 was down 1% at 2,081, while the S&P Midcap 400 lost 1.6% to 1,476 and the S&P Smallcap 600 shed 1.8% to 697.
Energy stocks were among the main fallers, with the S&P400 league led by Denbury Resources (NYSE:DNR), down 13.2% to $3.16.
While post-Brexit sterling fell 2% and hit a new 1985 low at $1.30, a UK give-year gilt maturity auction marked a record-low yield, and the Bank of England pumped emergency liquidity to banks, things were also looking dicey in New York.
Both the 10- and 30-year US Treasury bond yields hit fresh record lows as investors sought safer haven assets away from stocks.
Meanwhile, concerns over the potential fallout from the UK’s Brexit vote and a strengthening in the US dollar took their toll on the oil market on Tuesday, with US crude poised for its biggest one day decline in nearly 5 months.
The US benchmark West Texas Intermediate was 5% at $46.54. As well as Brexit fallout, oil suffered from industry headwinds too.
Data published on Tuesday showed a build in stockpiles at the delivery point for US crude futures. Energy data company Genscape said there was an increase of 230,025 barrels at the Cushing, Oklahoma storage hub during the week to July 1.
Despite more attacks by militants against Nigerian oil infrastructure, a deal to unify Libya’s competing National Oil Companies has proved to be a bearish factor for oil prices. A conflict between rival entities has played a role in keeping more than 1m barrels a day of Libyan oil off the market.
Open
The Dow Jones was nursing a triple-digit fall after the long holiday weekend, as US stocks followed global markets lower.
The Dow was off 114 points at 17,836 towards the end of the first hour of trading, as investors played catch-up following yesterday’s market holiday.
The broader-based S&P 500 was down 15 points at 2,088, with resource stocks prominent among the heavy losers.
The mid-cap S&P 400 index was hit harder still, shedding 19 points, or 1.3%, at 1,481 but even that decline was surpassed by the small caps measure, the Russell 2,000 index, which was down 17 points (1.5%) at 1,140.
On the New York Stock Exchange (NYSE), life sciences group Danaher Corp (NYSE:DHR) was trading in slimmed-down form, having spun off various assets into a new company called Fortive Corporation.
Danaher’s shares were 23% lower at US$78.49.
In similar vein, on the Nasdaq exchange, EPIRUS Biopharmaceuticals Inc (NASDAQ:EPRS) almost halved in value after completing the sale of its wholly-owned Dutch subsidiary.
On a bright note, Insys Therapeutics Inc (NASDAQ:INSY) advanced 13% to US$15.22 as the US Food and Drug Administration approved its treatment for AIDS and cancer symptoms, Dronabinol, almost two years after previously rejecting an earlier application.