U.S. Stocks Slide as Bond Yields Rise

  • Treasury yield hit 3%
  • Most S&P sectors swing lower
  • Crude oil falls

The Dow Jones Industrial Average tumbled more than 600 points at one point Tuesday as it extended its losing streak to five sessions, after investors were spooked by a warning from industrial giant Caterpillar and by rising government bond yields.

Major benchmarks opened higher but turned sharply lower in afternoon trading after executives at


considered a bellwether for the economy, warned its margins may have peaked in the first quarter due to rising manufacturing costs.

Eight of the 11 sectors in the S&P 500 slumped, while the utilities, telecommunications and real estate groups climbed, as those areas are generally considered safety plays because of their hefty dividends.

The blue-chip index fell 424.56 points, or 1.7%, to 24024.13, suffering its longest losing streak since March 2017, when the market fell for eight straight sessions. The S&P 500 dropped 35.73 points, or 1.3%, to 2634.56 and the Nasdaq Composite fell 121.25 points, or 1.7%, to 7007.35.

Despite a relatively strong start to the earnings season, even companies that have topped expectations haven’t been rewarded at the same pace as in recent quarters, according to data from FactSet. And some analysts have warned solid results may already be priced into the market.

Shares of Caterpillar, which beat earnings and sales estimates, tumbled $9.55, or 6.2%, to $144.44 after company executives characterized the first quarter as a “high watermark for the year” on their earnings call and said the heavy machinery maker didn’t expect to see operating margins at the same level.

Aaron Clark, principal for GW&K Investment, said Caterpillar’s comments about peaking margins weighed on sentiment Tuesday.

“That kind of was the event that triggered all this,” Mr. Clark said, noting that the comments ignited concerns about other industrial companies and the broader market.

In other earnings-related moves, shares of 3M dropped 14.75, or 6.8%, to 201.13 in the stock’s biggest decline on a percentage basis since December 2008, after the industrial conglomerate lowered the high end of its earnings guidance.

And Travelers slumped 4.35, or 3.2%, to 132.88 after the insurer reported higher catastrophe losses.

Together, the losses at Caterpillar, 3M and Travelers took 197 points off the Dow industrials.

In the tech sector,


GOOGL -0.19%

shares fell 51.17, or 4.8%, to 1022.64 after the Google parent posted a surge in profit but a rise in expenses. Those declines weighed on other technology-related stocks, including those in the popular FANG trade.


FB 0.79%


AMZN -0.38%



NFLX -0.95%

all fell at least 3.7%.

Larry Hatheway,

chief economist and head of investment solutions at GAM, said earnings have been good, but the market wasn’t responding much to them.

Climbing] bond yields “could be holding the market back from where it would otherwise be,” he said.

In the Treasurys market, the benchmark U.S. government bond yield, a barometer that influences borrowing costs for consumers, corporations and state and local governments, topped 3% for the first time in more than four years.

The yield on the 10-year Treasury note settled at 2.983%, up slightly from 2.973% Monday afternoon. Yields rise as bond prices fall.

A surge above 3% could spook some investors, particularly those who for years have said low yields justified high stock valuations, while raising corporate borrowing costs and even mortgage rates.

Analysts have attributed the recent rise in yields partly to a climb in oil prices, which has helped push up inflation expectations. U.S. crude oil fell 1.4% to $67.70 a barrel Tuesday as investors weighed concerns that the U.S. could withdraw from the Iranian nuclear deal, a move they say could tighten global supplies.

Other geopolitical concerns have also hurt sentiment in recent weeks.

Sahak Manuelian, managing director at Wedbush Securities, said one of the things weighing on the market was President

Donald Trump’s

comments midday about North Korea and Iran. Mr. Trump had said Iran will have “big problems” if it gets back into nuclear weapons. That “doesn’t sit well,” Mr. Manuelian said.

Jonathan Corpina,

senior managing partner for Meridian Equity Partners, said he wasn’t too worried about Tuesday’s moves and noted trading volumes have been light and the market could easily reverse course Wednesday. When fewer people are acting as players, the trades that are being made are amplified, he added.

Write to Riva Gold at riva.gold@wsj.com and Allison Prang at allison.prang@wsj.com

Appeared in the April 25, 2018, print edition as ‘Caterpillar, Bonds Sink Blue Chips.’

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