(Bloomberg) -- Declines in commodity producers and banks led U.S. stocks lower after comments from Bank of England Governor Mark Carney reawakened concerns that Britain's exit from the European Union will further weigh on tepid global growth.
Energy and financial shares, which had led this year's recovery from 22-month lows in February, were among the biggest losers Tuesday as investors shied away from riskier assets. ConocoPhillips fell 3.7 percent, with West Texas Intermediate crude futures dropping 4.4 percent. Miner Freeport-McMoRan Inc. slid 6.7 percent. Banks retreated for a second session, with JPMorgan Chase & Co. and Goldman Sachs Group Inc. slumping at least 2.5 percent.
The S&P 500 Index fell 0.7 percent to 2,087.35 at 12:33 p.m. in New York, its first retreat in five sessions. The Dow Jones Industrial Average lost 110.51 points, or 0.6 percent, to 17,838.86. The Nasdaq Composite Index decreased 1 percent, and the Russell 2000 Index of small caps dropped 1.6 percent. The BOE's Carney warned today of prospects for “a material slowing of the economy,” amid developing risks from Britain's EU decision.
“The market should not have rebounded, in our view, the way it did last week in the aftermath of Brexit,” said Phil Orlando, who helps oversee $360 billion as chief equity-market strategist at Federated Investors Inc. in New York. “What we saw in the last four days was a reversal of the normal knee-jerk reaction. The market is just saying, ‘June 23 didn't exist, everything is back to normal and we're just going to ignore all of the economic repercussions.' I think that's foolish.”
Equities pulled back after capping on Friday their strongest weekly advance since November, spurred by assurances that central bankers are prepared to loosen monetary policy to counter fallout from the Brexit vote. Investors sense of relief has tempered today amid concern over the health of the global economy, and whether efforts by policy makers will be enough to bolster growth.
While the U.S. market was shut on Monday in observance of Independence Day, European stocks dropped, and the MSCI All-Country World Index slid on Tuesday for the first time in more than a week amid a retreat in commodities.
The S&P 500's four-day rebound last week, its longest winning streak since March, nearly wiped out its losses stemming from the U.K. vote. The gauge had climbed within 1 percent of record just before the referendum's result, and then lost 5.3 percent in its worst two-day rout in 10 months. With Tuesday's declines, a measure of turbulence rebounded after its biggest-ever weekly drop. The CBOE Volatility Index rose 9 percent to 16.11, after the gauge known as the VIX tumbled 43 percent last week.
Investors also face a looming earnings reporting season, which gets underway next week, with analysts predicting a decline of 5.4 percent for companies in the S&P 500. That would mark a fifth straight quarterly drop, the longest streak since 2009. Weaker-than-forecast results in the first three months of the year from tech giants including Microsoft Corp. and Apple Inc. had a hand in halting a rally in April as the S&P 500 neared its all-time high.
Since the Brexit vote, traders have pushed back their bets for a Federal Reserve interest-rate increase, pricing in a less than 50 percent chance of higher borrowing costs before 2018. New York Fed President William Dudley is scheduled to speak this afternoon. Data today showed factory orders fell more than estimated in May, while durable goods orders declined 2.3 percent after rising 3.2 percent in April.
“People are concerned about global growth,” said John Plassard, a senior equity-sales trader at Mirabaud Securities in Geneva, which oversees 34 billion Swiss francs ($35 billion) in assets. “We have the Brexit problem, the general growth and U.S. isn't in an excellent shape either.”
Seven of the S&P 500's 10 main industries fell, led by a 2.4 percent slump for energy stocks and declines of at least 1.5 percent for financials and raw materials. Investors sought refuge in groups considered defensive in nature, as consumer-staples, utilities and phone companies rose at least 0.4 percent.
Energy companies snapped a four-day rally, slumping 2.4 percent amid lower oil prices. Southwestern Energy Co. tumbled 11 percent, its biggest daily decline in almost four months, while Chesapeake Energy Corp. and Range Resources Corp. both slipped at least 7.5 percent.
Financials stocks slumped for a second straight session, falling 1.6 percent. Banks led the selloff, as the KBW Bank Index tumbled 2.7 percent, with declines of at least 4.3 percent for Zions Bancorporation and SVB Financial Group. CBRE Group Inc. fell 6.3 percent to the lowest level since February, bringing its three-day decline to 8.3 percent.
Consumer staples stocks surged 0.8 percent to the highest ever, for the group's fourth rally in five sessions. Clorox Co. and Dr. Pepper Snapple Group Inc. rose more than 1.3 percent to all-time highs. Altria Group Inc. rallied for a third consecutive session to a record, increasing 1.4 percent. Rivals PepsiCo Inc. and Coca-Cola Co. added at least 0.9 percent.
Utilities rose 0.5 percent to an all-time high, as Consolidated Edison Inc., WEC Energy Group Inc. and Pinnacle West Capital Corp. jumped at least 1.1 percent to trade at record levels on a closing basis. The group is coming off its best week of performance since March 2015.
--With assistance from Roxana Zega To contact the reporters on this story: Anna-Louise Jackson in New York at ajackson36@bloomberg.net, Bailey Lipschultz in New York at blipschultz@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, John Shipman
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