Investing.com – Wall Street took profits in risk-off trade on Tuesday after both the long holiday weekend and having pocketed its largest weekly gain since November 2015, while an unexpected build in crude stockpiles sent oil plunging more than 4%.
At 15:18GMT or 11:18AM ET, the Dow 30 fell 96 points, or 0.54%, the S&P 500 lost 13 points, or 0.60%, while the tech-heavy Nasdaq Composite traded down 43 points, or 0.89%.
Most eyes were on Britain Tuesday as traders continued to watch the fallout from the U.K.’s decision to leave the European Union (EU), known as a Brexit.
U.K.’s activity in its services sector registered its weakest quarterly growth in more than three years with uncertainty ahead of the EU referendum blamed as the culprit.
The Bank of England (BoE) announced new measures to combat what it considered to be a “period of heightened uncertainty” by cutting the counter-cyclical buffer on bank lending to 0% from 0.5%.
BoE governor Mark Carney explained that the move would provide greater flexibility to domestic banks to supply credit to U.K. households and firms.
Nevertheless, the British pound fell to an intraday low of $1.3045 against the dollar, its weakest level since 1985.
With the risk-off sentiment, investors poured into bonds with the yield on the U.S. 10-year Treasury hitting another record low at 1.370% on Tuesday.
In other examples of the general flight to safe-haven assets, gold jumped 1% nearing a two-year high, while the dollar also moved higher against a trade-weighted basket of six major currencies.
On the macro front, U.S. factory orders fell slightly more than expected in May, though growing order backlogs and lean inventories could suggest that the worst of the manufacturing downturn had come to an end.
Investors were already looking ahead to Friday’s June’s employment report as a key factor for determining the Fed’s outlook, especially since it could serve to help clarify whether May’s numbers were simply transitory.
Not much had changed on Tuesday in regard to market expectations for Federal Reserve (Fed) policy moves.
There was still 0% chance of a rate hike at the meeting later in the month and Fed fund futures still dismissed an increase for the rest of this year.
In that light, the key for the July meeting will not be a policy move but whether the data in the run-up to the decision will sway the Fed towards a more dovish or more hawkish stance.
Meanwhile, oil prices were already under heavy selling pressure on Tuesday, as investors fled anything considered a risky asset amid concerns over the global economy.
But crude took a step even lower after Genscape data showed an unexpected 230,000 barrel build in inventories at the all-important Cushing, Oklahoma oil trading hub.
U.S. crude futures sank 4.47% to $48.80 by 15:21MT or 11:21AM ET, while Brent oil slumped 4.41% to $47.89.
Due to Monday’s 4th of July holiday, data on U.S. crude stockpiles from API and EIA will be released one day later than normal.