China Stock Turmoil 2015

Wall Street dragged down by slump in health care and biotech stocks; US treasury yields rise

PUBLISHED : Wednesday, 21 October, 2015, 8:46am
UPDATED : Wednesday, 21 October, 2015, 8:46am

US Treasury yields rose on Tuesday on signs of improvement in the US housing market, while shares on Wall Street edged lower after a slump in health care and biotech stocks.

The S&P health care sector ended 1.5 per cent lower, dragged down by Allergan and Pfizer, while a drop in IBM shares also offset gains in companies that reported strong quarterly results such as Verizon and United Technologies.

European shares ended lower, with traders citing profit-taking in the absence of anything to justify further gains. Major energy stocks such as BP and Total were among the decliners.

Earnings for S&P 500 companies are expected to have fallen about 4 per cent in the third quarter, while revenue is expected to have declined 3.8 per cent, according to Thomson Reuters data.

“You’re seeing weakness in momentum names in general. Obviously the health care names are under pressure again, especially pharma companies,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Benchmark 10-year Treasury yields hit 2.079 per cent, their highest in over a week.

Commerce Department data showed US housing starts increased 6.5 per cent in September to a seasonally-adjusted annual pace of 1.21 million units. That beat expectations for 1.15 million units, according to a Reuters poll of economists.

MSCI’s all-country world equity index, which tracks shares in 45 markets, was last down 0.2 per cent at 405.72. Europe’s broad FTSEurofirst 300 index closed down 0.45 per cent at 1,431.95.

The Dow Jones industrial average ended 0.08 per cent lower, at 17,217.11. The S&P 500 closed down 0.14 per cent, at 2,030.77. The Nasdaq Composite ended 0.5 per cent lower, at 4,880.97.

US crude prices eased slightly, failing to hold onto marginal gains earlier in the session, as market participants waited for direction from two key US oil storage reports. Industry group the American Petroleum Institute (API) will report stockpiles data later on Tuesday, and the government’s EIA will release oil inventory data on Wednesday.

Brent crude settled up 10 cents, or 0.2 per cent, at US$48.71 a barrel. US crude settled down 34 cents, or 0.7 per cent, at $45.55 per barrel.

The euro inched higher against the dollar after falling for three straight sessions, bolstered in part by quarterly lending data from the ECB that showed euro zone banks loosened their lending standards more than expected over the last few months despite recent global market volatility.

That lessened the need for the ECB to ramp up its 1 trillion euro asset purchase programme, this week at least.

“What actually changed the euro was that banks have a lending survey and for October it was very positive - only pointed out positives, and so there’s no need for the European Central Bank to increase quantitative easing,” said Juan Perez, foreign currency trader, at Tempus Consulting in Washington.

The euro was last up 0.08 per cent against the dollar at $1.13385. The dollar index, which measures the greenback against a basket of six major currencies, was last down slightly at 94.893.