Stock market news: Dow drops more than 400 points

A
trader watches the screen at his terminal on the floor of the New
York Stock Exchange in New York October 15, 2014.
REUTERS/Lucas Jackson

Wall Street shuddered Tuesday, mirroring a risk-off
sentiment around the world, as geopolitical tensions and the
prospect of slowing economic growth continued to rattle
investors. 

The Dow dropped 1.6%, or more than 400 points. The Nasdaq
composite fell 1.9%, and the S&P 500 was down
1.6%.  

“There weren’t any major new developments overnight,” David
Lefkowitz, senior Americas equity strategist at UBS, said in an
email. “Instead, the market continues to be focused on some of
the macro issues that have been weighing on the market for the
past few weeks including higher interest rates, trade frictions,
and pockets of softness in the global economy.”

Industrial companies sank after corporate earnings in the sector
disappointed.
3M (-8%)
missed on both the top and bottom line and slashed its profit
forecast for the year. Caterpillar (-7.8%)
beat profit expectations but lowered its guidance, warning
tariffs would push up its costs. 

“Earnings results have been good, but not quite as strong as
recent quarters,” Lefkowitz added. “In the US, results this
morning from industrial bellwethers have been mixed, with the
outlook highly dependent on specific consumer markets and
exposure to cost inflation.”

Across the Atlantic, European stocks dropped to their lowest
level in two years as Italy’s plans to
sharply increase public
spending continued to rattle the region. Officials in
Brussels have been pushing back against the populist government
in Rome, calling the budget an unprecedented breach of European
Union fiscal rules. The pan-European Stoxx 600 fell more than 1%
to levels not seen since December 2016. 

That came after a two-day recovery in Shanghai lost steam, giving
way to fears about a slowing economy. After decade-low
gross domestic product figures battered Chinese
stocks, the government jumped in with promises to
prop up equities on Friday. But that failed to settle nerves for
long, with the Shanghai composite closing down 2.2% on
Tuesday. 

Investors flocked to the relative safety of US government
bonds, with the 10-year yield falling nearly seven basis points
to 3.126%. Gold,
another safehaven, rose more than 1% to a three-month peak at
$1,237.71 an ounce.

Elsewhere,
oil sank to its lowest level since September. The American
Petroleum Institute, an industry group, is expected to report US
crude inventories later Tuesday. Last week, Saudi Arabia said it
would not resort to an oil embargo in a rift with Washington.

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