Stocks drop on Syria tension; Dow at 2-month low
NEW YORK — U.S. stocks fell hard on Tuesday, with the Dow ending at a two-month low, as unease over possible U.S. action against Syria shook global markets.
Gold rose to a three-month high, bonds rallied, and crude oil closed above $109 a barrel for the first time since early last year.
“Global events are taking the forefront here. Hearing that the U.S. may be more aggressive with Syria set a negative tone to the market,” said Brad Sorensen, director of market and sector analysis at Charles Schwab.
“Any time there are rumors of military conflict, the first reaction is to pull back. But I don’t think it’s anything that will be sustained. U.S. assets aren’t particularly threatened and oil production isn’t in danger,” Sorensen added. He cautioned against making too much of Wall Street’s action in the week ahead of the long Labor Day weekend, given that many traders are on vacation and trading volume is low.
The Dow Jones industrial average shed 170.33 points, or 1.1 percent, to 14,776.13, with Bank of America Corp. and Microsoft Corp. pacing declines that included all but two of its 30 components.
The S&P 500 index lost 26.30 points, or 1.6 percent, to 1,630.48. The Nasdaq composite declined 79.05 points, or 2.2 percent, to 3,578.52, with the technology-heavy index suffering its worst point loss this year.
Wall Street erased gains late Monday after Secretary of State John Kerry said the United States would hold Syria accountable for using chemical weapons that opposition groups contend killed more than 1,300 people.
“The threat of U.S. intervention in Syria in any form was enough for traders to look down positions and move to the sidelines,” Fred Dickson, chief investment strategist at Davidson Cos., wrote in emailed commentary.
Defense Secretary Chuck Hagel said in a televised interview with the BBC that U.S. forces in the region are ready, should President Barack Obama order action against Syria.
On Tuesday, the unease over tensions in the Middle East had the Chicago Board Options Exchange Volatility Index, or VIX, surging nearly 12 percent.
Investors soaked up benchmark government debt and precious metals in a flight to safety.
The yield on the 10-year Treasury note, used in determining mortgage rates and other consumer loans, fell to 2.71 percent. Yields move opposite to prices.
Gold futures jumped $27.10, or 2 percent, to $1,420.20 an ounce, pushing gold into a bull market off its June lows. Crude-oil futures gained $3.09, or 2.9 percent, to $109.01 a barrel.
Wall Street’s reaction to Tuesday’s economic reports was negligible.
Consumer confidence rose a bit in August, according to the Conference Board, with sentiment improving some on jobs and earnings prospects.
A separate report had U.S. home prices rising in June, with stock-index futures holding their losses in the wake of the data.
“The economic reports, while decent, don’t seem to be having much of an impact on today’s market,” noted Sorensen, who observed investors were even more blase about word from the Treasury Department on Monday that the U.S. would exceed its capacity to pay its bills in mid-October.
“I don’t think that’s a big surprise; everybody knew the debt ceiling would be hit in October. We’ll see more reaction once Congress gets back in session after the Labor Day holiday,” he said.
Treasury Secretary Jacob Lew repeated Tuesday that the White House would not negotiate over the debt limit, saying he believes members of Congress understand the importance of the nation meeting its obligations.
Among Tuesday’s movers, J.C. Penney Co. declined 1.4 percent after Bill Ackman’s Pershing Square Capital Management sold its holdings in the department-store chain for $504 million.
Other notable decliners included Advanced Micro Devices Inc, its shares down 5.3 percent, and First Solar Inc, off 5 percent.
Shares of Goodyear Tire & Rubber Co. advanced 2 percent.
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