Investors were jolted after three U.K. financial firms stopped trading in their commercial property funds because large numbers of investors were trying to liquidate their holdings.
Stocks mostly fell, although investors bought shares of companies seen as safe plays, like household goods makers and utilities. Bond yields plunged, with the 10-year and 30-year Treasury yields reaching record-low levels as demand for Treasuries rose and prices jumped.
It was an abrupt end to a big four-day rally for stocks, and a reminder that the effects of Britain’s vote to leave the European Union has left markets deeply unsettled. Answers may be very slow in coming.
“We’ve seen a tremendous rally pretty much every night in longer-term bonds” since the vote, said Tom di Galoma, managing director at Seaport Global Holdings. “There’s just so many unanswered questions both from the legal standpoint, a diplomatic standpoint, an economic standpoint.”
The Dow Jones industrial average fell 108.75 points, or 0.6 percent, to 17,840.62. The Standard & Poor’s 500 index slid 14.40 points, or 0.7 percent, to 2,088.55. The Nasdaq composite fell 39.67 points, or 0.8 percent, to 4,822.90. U.S. markets were closed Monday for the Independence Day holiday.
Stocks took a steep two-day plunge last month after Britain voted to leave the European Union. Over the last four days they recovered almost all of the ground they lost after the vote.
On Tuesday the trouble began when Aviva Investors, Standard Life and M&G Investments stopped trading in their commercial property funds. The firms said they were protecting other investors who wished to remain in their respective funds. The Bank of England said it eased bank rules to allow them to lend up to 150 billion pounds ($200 billion) to households and businesses.
The pound fell to $1.3032 from $1.3259 on Tuesday, its weakest in 31 years.
The yield on the 10-year note dropped to 1.38 percent in late trading, down from 1.45 percent late Friday. It went as low as 1.36 percent during the day, according to Tradeweb. The yield on the 30-year note fell to 2.16 percent. It was 2.24 percent Friday.
According to Tradeweb, the yield on the 10-year and 30-year Treasury notes are both at all-time lows. They’ve tumbled this year as worries about the global economy, the U.S. Federal Reserve and now Britain have investors craving safety.
Other traditionally steady investments also did well. Gold rose $19.70, or 1.5 percent, to $1,358.70 an ounce. Silver gained 32 cents, or 1.6 percent, to $19.91 an ounce. Copper fell 3 cents to $2.18 a pound. Gold is at its highest price in more than two years and silver is the highest it’s been since August 2014.
Benchmark U.S. crude sank $2.39, or 4.9 percent, to close at $46.60 a barrel in New York. Brent crude, used to price international oils, fell $2.14, or 4.3 percent, to close at $47.96 a barrel in London. That pulled energy companies lower. Halliburton shed $2.03, or 4.5 percent, to reach $43.53 and ConocoPhillips fell $1.81, or 4.2 percent, to $41.70. Schlumberger retreated $1.89, or 2.4 percent, to $77.63.
Lower bond yields translate to lower interest rates on many kinds of loans such as mortgages, and that hurts bank profits. Citigroup slid $1.39, or 3.3 percent, $40.78 and Goldman Sachs fell $3.80, or 2.6 percent, to $144.45.
Chemical and mining companies also took large losses. But the types of stocks that are generally considered the safest all traded higher. Those included household goods companies. Clorox rose $2.08, or 1.5 percent, to $139.24 and Coca-Cola gained 31 cents to $45.43. Also rising were phone and utility companies.
In other energy trading, wholesale gasoline fell 8 cents, or 5.6 percent, to $1.43 a gallon. Heating oil fell 7 cents, or 4.4 percent, to $1.45 a gallon. Natural gas dropped 22 cents, or 7.5 percent, to $2.76 per 1,000 cubic feet.
A majority stake in Hostess Brands, the company that makes Twinkies and Ding Dongs, is being acquired by Gores Holdings. Gores will pay $375 million in cash and commit another $350 million in the deal. Hostess filed for Chapter 11 bankruptcy protection four years ago. Gores Holdings is an acquisition company run by the private equity firm Gores Group. The holding company’s stock rose 23 cents, or 2.4 percent, to $10.01.
Insys Therapeutics climbed after the Food and Drug Administration approved its drug Syndros, a synthetic version of THC, a component of marijuana. Syndros is intended to treat severe weight loss in AIDS patients and nausea and vomiting in chemotherapy patients. The stock jumped 93 cents, or 7 percent, to $14.40.
Outside the U.S., stock indexes were mostly lower. France’s CAC 40 fell 1.7 percent and Germany’s DAX lost 1.8 percent. However Britain’s FTSE 100 picked up 0.4 percent. Japan’s benchmark Nikkei 225 slipped 0.7 percent to finish and South Korea’s Kospi fell 0.3 percent. Hong Kong’s Hang Seng dipped 1.4 percent.
The dollar fell to 101.49 yen from 102.58 yen. The euro slid to $1.1075 from $1.1125.