Healthcare and technology stocks lead biggest Wall Street drop since August

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Hefty losses in healthcare and technology companies led US stocks sharply lower on Tuesday, handing the market its biggest reverse since August and its worst two-day drop since May.

The broad slide, which briefly sent the Dow Jones industrial average down by more than 400 points, erased some of the big gains the market had racked up since the beginning of the year.

Banks, industrial companies and energy stocks also accounted for a big slice of the market’s losses. Bond prices fell, sending yields to their highest level since April 2014.

“This was a market that was overbought and it was vulnerable to something pulling it back,” said Quincy Krosby, chief market strategist at Prudential Financial.

“That said, we’re in the heaviest part of earnings season this week and we expect to see the majority of the reports coming out to be positive. That could be the catalyst to have buyers come in.”

The Standard & Poor’s 500 index fell 31.10 points, or 1.1%, to 2,822.43, the biggest one-day drop since August 17.

The Dow had its biggest decline since May, losing 362.59 points, or 1.4%, to 26,076.89. The average had been down more than 411 points.

The Nasdaq slumped 64.02 points, or 0.9%, to 7,402.48. The Russell 2000 index of smaller-company stocks gave up 15.29 points, or 1%, to 1,582.82.

The market’s last two-day losing streak was in late December.

Healthcare companies were by far the biggest losers on Tuesday. The sector finished with a loss of 2.1%. It is still up 8.1% this year.

Insurers, drugmakers and distributors slumped following news that Amazon was teaming up with JPMorgan Chase and Berkshire Hathaway to create a company that helps their US employees find quality care at a reasonable cost.

The venture, whose initial focus would be on developing technology, is in its early planning stage.

Express Scripts slid $2.61, or 3.2%, to $79.31. Cigna tumbled $16.01, or 7.2%, to $207.89. UnitedHealth Group lost $10.76, or 4.3%, to $236.65. Anthem fell $13.58, or 5.3%, to $243.44.

HCA bucked the trend after the hospital chain posted better fourth-quarter results than analysts had expected. The stock gained $3.83, or 3.9%, to $101.45.

The news gave Amazon shares a lift. The stock added $20.14, or 1.4%, to $1,437.82.

Technology stocks fell almost as much as healthcare shares. Corning lost $1.92, or 5.6%, to $32.33.

Several big-name companies are due to report quarterly results on Wednesday and Thursday, including Apple, Amazon, Microsoft, Facebook and Google’s parent company Alphabet.

Also on investors’ radar are Tuesday night’s State of the Union address and a two-day meeting of the Federal Reserve’s policymaking committee that ends on Wednesday.

The Fed has signalled it expects to raise its key short-term interest rate three times this year.

But some investors speculated that the growing strength in the US economy and labour market could prompt the central bank to perhaps forecast an extra rate increase this year.

Energy sector stocks declined along with the price of crude oil. Noble Energy fell $1.73, or 5.4%, at $30.40.

Benchmark US crude slid $1.06, or 1.6%, to settle at $64.50 a barrel on the New York Mercantile Exchange.

Brent crude, used to price international oils, dropped 44 cents, or 0.6%, to close at $69.02 a barrel in London.

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