U.S. stocks close at lowest level in nearly 2 years as S&P 500 sees longest losing streak since February 2020

What drove markets

Stocks fluctuated between gains and losses on Tuesday, but the S&P 500 ultimately closed at its lowest level since Nov. 30, 2020 while the Dow recorded its lowest close since Nov. 12 of that same year.

The blue-chip gauge briefly broke below 29,000 Tuesday afternoon, marking the first time it has dropped below that level on an intraday basis since Nov. 12, 2020.

Market analysts attributed stocks’ woes to higher Treasury yields and the stronger dollar and which have become major bugbears for the market. They also blamed a batch of unexpectedly strong economic data, which helped reinforce the notion that “good news” for the U.S. economy is once again “bad news” for the market.

“What you saw today was ‘good news is bad news’ — we’re back to that again,” said Joe Saluzzi, co-head of equity trading at Themis Trading. “That gives the Fed more cover in case people start to complain about what the Fed is doing.”

He also said he expects stocks to remain under pressure for some time.

“There’s just no conviction in this market,” Saluzzi said.

The yield on the 10-year Treasury
TMUBMUSD10Y,
3.950%
rose 8.5 basis points to 3.963%, while the 2-year yield
TMUBMUSD02Y,
4.287%
rose less than 1 basis point to 4.308%. The dollar remained modestly higher, with the ICE U.S. Dollar Index DXY up 0.1% at 114.26.

See: A surging U.S. dollar is creating an ‘untenable situation’ for the stock market, warns Morgan Stanley’s Wilson

Investors digested a spate of U.S. economic data on Tuesday, but Saluzzi said the focus was on new home sales data for August, as well as a report on consumer confidence.

New home sales came in at 685,000 last month, handily beating consensus expectations, while the Conference Board’s consumer confidence indicator printed at 108, the best since April.

The boost to consumer attitudes has been driven mostly by lower gasoline prices and the still-robust labor market, said Peter Boockvar, chief investment officer at the Bleakley Advisory Group, in an emailed note responding to the data.

In other economic-data news, durable-goods orders fell 0.2% in August, declining less than forecast. Orders minus transportation were up 0.2%, while core durable-goods orders climbed 1.3%. The Case-Shiller 20-city home price index showed home prices fell in July for the first time in just over 10 years.

Investors also heard from several Fed speakers Tuesday, including Chicago Fed President Charles Evans, who said rates may need to plateau next year.

Minneapolis Fed President Neel Kashkari said Fed officials are in rare agreement on the goal of bringing inflation down to the 2% target, and added that a “soft landing” for the U.S. economy is still possible.

See: Fed’s Powell Eyes Oversight of Stablecoin Issuers, Regulation of Crypto Wallets

Fed Chairman Jerome Powell spoke at a cryptocurrency conference, but didn’t say anything notable about monetary policy.

The CBOE Volatility gauge
VIX,
+1.05%,
also known as the VIX, rose 1.9% to finish Tuesday’s session just shy of 33, its highest end-of-day level since June.

See: The stock market could be on the verge of a ‘tradeable’ rebound, according to a key technical indicator

Outside the U.S., relative calm returned to the U.K. gilt market
TMBMKGB-10Y,
4.514%
after its rout Friday and Monday, caused by fears about the government’s fiscal strategy. This in turn has helped steady the pound.

Companies in focus

• Nautilus Inc.
  NLS,
  +1.80%
  said late Monday that a potential sale of the fitness-products company was being considered, part of a broader review of strategic alternatives launched by its board. Shares rose 1.8%.

• Hertz Global Holdings Inc.
  HTZ,
  +4.42%
  and BP PLC
  BP,
  +0.27%

  BP,
  +1.06%
  said Tuesday they have signed a memorandum of understanding for the development of a network of electric vehicle charging stations in North America. Shares of Hertz rose 4.4%, while BP’s U.S.-listed shares rose 0.5%.

• Domino’s Pizza Inc.
  DPZ,
  -3.25%
  and Organon & Co.
  OGN,
  -3.54%
  and Digital Realty Trust Inc.
  DLR,
  -3.98%
  were among the biggest losers on the S&P 500.