US STOCKS-Stocks close lower as Middle East tensions, Treasury yields weigh

BY Reuters | TREASURY | 04/15/24 04:29 PM EDT


Goldman Sachs (GS) rises after Q1 profit beat


Salesforce (CRM) falls on report of likely Informatica (INFA) deal


Tesla falls on layoffs report


Indexes down: Dow 0.65%, S&P 500 1.2%, Nasdaq 1.79%

(Updated at 4:00 p.m. ET/2000 GMT)

By Chuck Mikolajczak

NEW YORK, April 15 (Reuters) - U.S. stocks closed sharply lower on Monday, as an early lift from a strong retail sales report succumbed to a jump in Treasury yields and concerns about rising geopolitical tensions between Iran and Israel.

With the S&P 500 coming off its biggest one-day percentage drop since Jan. 31 in the prior session, stocks opened higher in part after data showed retail sales increased by more than expected in March.

Also providing early support were gains in some financial stocks after their quarterly results, as Goldman Sachs (GS) rose 2.92% after its first-quarter profit beat Wall Street estimates, fueled by a recovery in underwriting, deals and bond trading that lifted its earnings per share to the highest since late 2021.

M&T Bank (MTB) jumped 4.74% after forecasting better-than-expected annual net interest income (NII), while brokerage Charles Schwab (SCHW) advanced 1.71% despite reporting a fall in quarterly profit. The stocks were the three best performers in the S&P 500 financial sector.

But gains faded over concerns the hostilities between Israel and Iran could continue to flare, and Treasury yields jumped, with the benchmark 10-year U.S. Treasury note hitting its highest level since November.

"You saw a little bit of a bounce this morning because maybe people thought 'OK it sold off on Friday' in anticipation of something really bad happening in the Middle East," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

"All the geopolitical stuff is going to cause tension and anxiety in the market, the realization that rates are not going down anytime soon has got to be finally hitting home, that's what the bond market is telling you, that rates are going to go higher."

The Dow Jones Industrial Average fell 248.13 points, or 0.65%, to 37,735.11, the S&P 500 lost 61.59 points, or 1.20%, to 5,061.82 and the Nasdaq Composite lost 290.07 points, or 1.79%, to 15,885.02.

The S&P 500 is now down 2.64% over the past two sessions, it's biggest two-day drop since early March 2023. The index also closed below its 50-day moving average, a technical support level, for the first time since Nov. 2.

Israel faced growing pressure from allies to show restraint and avoid an escalation of conflict in the Middle East as it considered how to respond to Iran's weekend missile and drone attack, launched after a suspected Israeli attack on its embassy.

Each of the 11 major S&P sectors were lower, with the rate-sensitive real estate and utilities sectors among the worst performers.

Stocks have struggled recently, with the S&P 500 suffering two straight weeks of declines and its biggest weekly percentage drop since October last week as investors have pushed back expectations for the timing and size of any rate cuts from the Federal Reserve.

Apple (AAPL) fell 2.19% as one of the biggest drags on the S&P 500 after data from research firm IDC showed the company's smartphone shipments dropped about 10% in the first quarter of 2024.

Tesla slumped 5.6% after the EV maker said it will lay off more than 10% of its global workforce, according to an internal memo seen by Reuters.

Salesforce (CRM) stumbled 7.28% after Reuters reported, citing a source, that the customer relations software maker was in advanced talks to acquire Informatica (INFA).

On the NYSE, declining issues outnumbered advancing ones by a 5.1-to-1 ratio and on the Nasdaq, decliners outnumbers advancers by a 3.5-to-1 ratio.

There were 39 new highs and 138 new lows on the NYSE while on the Nasdaq, there were 37 new highs and 333 new lows.

Volume on U.S. exchanges was 11.53 billion shares, compared with the 11.03 billion average for the full session over the last 20 trading days.

(Reporting by Chuck Mikolajczak in New York Editing by Matthew Lewis And Aurora Ellis)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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