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25-Apr2018

US markets closed lower; rising bond yields spook investors

The US markets closed lower on Tuesday, led by a selloff in industrials, materials and technology shares. The selling pressure came after the 10-year Treasury yield briefly touched the psychologically important 3% level for the first time in four years, a move that comes as first-quarter earnings season was failing to excite investors, despite some strong results. Earnings were also in focus, with a deluge of high-profile companies reporting results before the open. The season has so far been strong, and more than 80% of the S&P 500 companies reporting so far have beaten profit forecasts. While that's above the 73% that beat in the fourth quarter of 2017, better-than-expected results often haven't been enough to lift shares thus far this season.

On the economy front, consumers' confidence rebounded slightly in April with a small gain that put the index back near an 18-year high, suggesting the US economy remains on sound footing despite fresh worries about trade tensions. The consumer confidence index climbed to 128.7 in April from 127 in March. Two months ago, the index hit the highest level since the end of 2000. The present situation index, a measure of current conditions, rose to 159.6 from 158.1. The future expectations index advanced to 108.1 from 106.2. New-home sales ran at a 694,000 seasonally adjusted annual rate in March. Sales of newly constructed homes surged, and earlier estimates were revised up, painting a rosier picture of the housing market than many economists had expected. The 694,000 rate in March was 4% above upwardly revised February figures, and the highest pace since November. It was 8.8% higher than a year ago. At the current pace of sales, it would take 5.2 months to exhaust available supply, a bit leaner than historical averages, but still healthy. The median sales price in March was 4.8% higher compared with a year ago.

Meanwhile, the S&P/Case-Shiller national index rose a seasonally adjusted 0.5% and was up 6.3% compared to a year ago in February. The 20-city index rose a seasonally adjusted 0.8% and was 6.8% higher than a year ago. The 6.8% annual gain in the closely-watched 20-city index was the strongest since mid-2014. February's Case-Shiller data, which actually covers the three-month period ending in that month, was also notable for another reason: the 20-city index finally broke above the peak it last touched in 2006.

The Dow Jones Industrial Average lost 424.56 points or 1.74 percent to 24,024.13, the Nasdaq dropped 121.249 points or 1.70 percent to 7,007.35, while the S&P 500 was down by 35.73 points or 1.34 percent to 2,634.56.


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