By Sara Sjolin, MarketWatch , Ryan Vlastelica
VIX volatility gauge climbs to 5-month high
U.S. stocks edged lower on Wednesday, putting the market on track to maintain its recent downward bias as investors remained cautious amid persistent geopolitical risks.
The main indexes briefly trimmed losses as the U.S. Secretary of State Rex Tillerson met with the Russian counterpart Sergei Lavrov to discuss the civil war in Syria and nuclear capabilities of North Korea.
The S&P 500 lost 8 points, or 0.3%, to 2,345, with seven of the 11 main sectors trading lower. Materials, industrials and financials were led losses, down about 1%. So-called defensive sectors, such as utilities and consumer staples, have attracted buyers.
The benchmark index closing at this level would mark the sixth drop over the past nine sessions.
“Markets are not willing to give up the reflation trade, nor are they willing to continue the “Trump rally”, resulting in a sideways move,” said Wouter Sturkenboom, senior investment strategist at Russell Investments.
“We think the rally driven by hope of faster growth was overdone and there is a potential for disappointment,” Sturkenboom said.
The Dow Jones Industrial Average fell 60 points, or 0.3%, to 20,590. Caterpillar Inc(CAT) and Boeing Company(BA) were leading the losses, with each down about 2% and 1.4% respectively.
The Nasdaq Composite Index lost 32 points to trade at 5,833, a decline of 0.6%. Volumes were expected to be lower than normal ahead of the Good Friday market holiday.
In recent days, the trading mood has been dented by heightened geopolitical tensions. President Donald Trump has been pressing China to act (http://www.marketwatch.com/story/trump-plans-to-turn-up-heat-on-north-korea-2017-04-12) on the threats coming out of North Korea, saying the U.S. will take unilateral action if Beijing doesn’t (http://www.marketwatch.com/story/china-wants-a-peaceful-solution-to-north-korea-threat-xi-tells-trump-2017-04-12). In addition, the White House has accused Russia of trying to cover up (http://www.marketwatch.com/story/us-accuses-russia-of-trying-to-cover-up-syria-chemical-weapons-attack-2017-04-11) the suspected chemical weapon attack in Syria, though Trump has said the U.S. isn’t headed for a ground war (http://www.marketwatch.com/story/trump-declines-to-endorse-bannon-says-us-not-going-into-syria-2017-04-11) in that country.
Read: Is this what the return of geopolitical risk looks like on Wall Street? (http://www.marketwatch.com/story/this-is-what-the-return-of-geopolitical-risk-looks-like-on-wall-street-2017-04-11)
In a press conference following the meeting between U.S. and Russian foreign secretaries, Lavrov said Moscow not convinced of chemical attack in Syria, but both countries agreed that a UN probe is necessary.
“Geopolitical issues can often drive only a brief reaction on markets and that would be the concern over whether to chase the breakouts. The VIX volatility index pulling to its highest since November reflects the concern traders now have as they look to add downside protection to their portfolios,” said Richard Perry, analyst at Hantec Markets, in a note on Wednesday.
The CBOE Volatility Index , also known as Wall Street’s “fear gauge,” rose 4.7% and traded near a five-month high. The index rose 23% since the start of the week.
U.S. Treasurys continued to rally, with the yield on the 10-year bond down 2 basis points to 2.28%. Gold , another asset seen as a safe place to invest in times of uncertainty, continued to gain (http://www.marketwatch.com/story/haven-demand-lifts-gold-to-5-month-high-2017-04-12) on Wednesday, trading at its highest level since early November.
Rising anxiety over the first-round French presidential election on April 23 has also been rattling markets (http://www.marketwatch.com/story/french-election-fears-return-to-rattle-bonds-euro-2017-04-11), on the prospect of a runoff between two euroskeptics: Far-right candidate Marine Le Pen and left-wing candidate Jean-Luc Melenchon. (http://www.marketwatch.com/story/french-election-fears-return-to-rattle-bonds-euro-2017-04-11)European stocks recovered on Wednesday (http://www.marketwatch.com/story/car-makers-help-drive-european-stocks-to-highest-in-more-than-a-year-2017-04-12), boosted by oil companies and car makers.
Other markets: Oil prices were volatile, trading 0.4% lower. Earlier, futures gained after The Wall Street Journal reported that Saudi Arabia wants to extend the producer agreement to cut output for another six months, when members of the Organization of the Petroleum Exporting Countries meet in May.
Asia markets closed mostly lower, with Japan’s Nikkei 225 index down 1%, pressured by a stronger yen. The dollar fell against most other major currencies, sending the ICE Dollar Index down 0.1% at 100.61.
On the economic front, U.S. import prices fell 0.2% in March, although the drop was mostly related to the impact of fuel. When that category is excluded, prices rose 0.2%.
Stock movers:BlackBerry Ltd. (BB.T) surged 15% and hit its highest level since January 2016 after it won an $814.9 million (http://www.marketwatch.com/story/qualcomm-does-not-agree-with-8149-million-arbitration-award-to-blackberry-but-says-it-is-binding-2017-04-12) arbitration case against Qualcomm Inc. (QCOM). Qualcomm fell 3.1%.
Delta Air Lines Inc.(DAL) gained 1.4% after reporting first-quarter earnings that were slightly better than forecast (http://www.marketwatch.com/story/delta-air-liness-stock-surges-after-profit-beats-expectations-2017-04-12).
Shares of Whole Foods Market Inc.(WFM) rose 1.8% after Bloomberg reported (https://www.bloomberg.com/news/articles/2017-04-11/amazon-said-to-mull-bid-for-whole-foods-before-jana-stepped-in) that Amazon.com Inc.(AMZN) considered buying the supermarket chain last year, but didn’t pursue a deal.
Activist investor Jana Partners LLC has instead amassed a large stake in Whole Foods (http://www.marketwatch.com/story/activist-investor-jana-amasses-large-stake-in-whole-foods-2017-04-11), according to a regulatory filing earlier this week.
Valspar Corp. (VAL) climbed 0.9% after the company announced an agreement to sell its North American industrial wood coatings business (http://www.marketwatch.com/story/valspar-to-sell-wood-coatings-business-to-axalta-to-appease-regulators-reviewing-sherwin-williams-merger-2017-04-12) to Axalta Coating Systems Ltd. (AXTA) for $420 million in cash. Axalta shares fell 1.7%.
12, 2017 15:33 ET (19:33
By Sara Sjolin, MarketWatch , Ryan Vlastelica