NEW YORK (Reuters) – U.S. stocks followed world stocks lower on Tuesday as weak sales forecast from chipmaker ASML weighed on tech shares, while crude extended its slide due to easing supply worries and weakening demand.
The three major U.S. indexes headed lower shortly after the opening bell, with the S&P 500 and the Dow easing back from Monday’s record closing highs.
Financial firms Goldman Sachs, Citigroup and Bank of America all posted better-than-expected profit, while healthcare companies UnitedHealth and Johnson & Johnson results underwhelmed investors.
But Netherlands-based chip equipment maker ASML posted third quarter results that surprised markets with weak bookings and lower-than-expected sales forecasts, dour news that proved contagious to the U.S. chip sector.
“The U.S. stock market is so heavily weighted in tech, it’s going to drive where the overall market appears to be going,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle. “But below the surface it’s not bad news across the board.”
“The global story is more due to soft data,” Haworth added.
Energy stocks, pulled lower by sliding crude prices, suffered the steepest percentage drop.
The Dow Jones Industrial Average fell 277.46 points, or 0.64%, to 42,787.76, the S&P 500 fell 35.70 points, or 0.61%, to 5,824.15 and the Nasdaq Composite fell 161.89 points, or 0.87%, to 18,340.79. European stocks posted their largest one-day percentage drop in over two weeks, weighed by tech stocks in the wake of ASML’s disappointing annual sales forecast.
Meanwhile, investors remained focused on the European Central Bank’s rate decision on Thursday.
MSCI’s gauge of stocks across the globe fell 5.29 points, or 0.62%, to 851.89. The STOXX 600 index fell 0.8%, while Europe’s broad FTSEurofirst 300 index fell 19.22 points, or 0.92%.
Emerging market stocks fell 11.34 points, or 0.98%, to 1,148.72.
Oil prices slid to a near two-week low, extending Monday’s losses amid easing supply pressures arising from the conflict in the Middle East, amid reports Israel’s Prime Minister Benjamin Netanyahu told U.S. President Joe Biden’s administration that Israel would avoid striking Iranian oil targets.
Additionally, OPEC and the International Energy Agency both lowered their global demand forecasts, mostly due to weakness in China.
“Sliding oil prices are disinflationary and that’s a positive for the broader economy,” said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. “What you’re seeing now is the speculation that Middle East oil properties are going to be exempt from attack.”
“And falling oil prices does say something about global demand.”
U.S. crude tumbled 4.40% to $70.58 per barrel, while Brent fell to $74.25 per barrel, down 4.14% on the day.
Benchmark U.S. Treasury yields edged lower, pausing after touching a 2-1/2 month high in the wake of soft manufacturing data from the New York Federal Reserve.
The yield on benchmark U.S. 10-year notes fell 3.7 basis points to 4.036%, from 4.073% late on Friday.
The 30-year bond yield fell 5.9 basis points to 4.3228% from 4.382% late on Friday.
The 2-year note yield, which typically moves in step with interest rate expectations, rose 1.3 basis points to 3.954%, from 3.941% late on Friday.
The dollar was nominally lower against a basket of world currencies amid wagers that the Federal Reserve will proceed with modest rate cuts in the near term.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.08% to 103.26, with the euro down 0.19% at $1.0888.
Against the Japanese yen, the dollar weakened 0.29% to 149.31.
Gold gained traction as the dollar lost some momentum.
Spot gold rose 0.49% to $2,664.00 an ounce.
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(Reporting by Stephen Culp; Additional reporting by Harry Robertson in London and Stella Qiu in Sydney, Editing by Nick Zieminski)