Stocks tumble globally as investors flee for safety

NEW YORK: Wall Street stocks followed Europe and Asia lower on Tuesday as investors fled for safety as they worried about US earnings, Italy’s finances and US trade tensions while pressure mounted on Saudi Arabia over the death of journalist Jamal Khashoggi.

Benchmark U.S. Treasury prices rose, sending yields to their lowest levels in almost three weeks as tumbling equity markets worldwide fed investor demand for low-risk debt.

The dollar index fell slightly, and oil prices fell after Saudi Arabia said it could supply more crude quickly if needed, reassuring investors ahead of US sanctions on Iran´s crude exports that start next month.

Shares of US industrial heavyweights 3M Co and Caterpillar Inc tumbled after 3M posted its biggest sales miss in 2 years and cut its forecast while Caterpillar disclosed weak order backlog and an increase in manufacturing costs.

"US stocks are floundering in early action," said Charles Schwab analysts, "exacerbating already skittish global sentiment".

"People are getting hysterical, taking these little dots and drawing universal trend lines," said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago, citing worries about a potential global slowdown.

The Dow Jones Industrial Average fell 368.06 points, or 1.45 percent, to 24,949.35, the S&P 500 lost 45.22 points, or 1.64 percent, to 2,710.66 and the Nasdaq Composite dropped 153.49 points, or 2.06 percent, to 7,315.14."The stock market has everyone´s attention.

The dollar/yen is moving almost tick-to-tick with stocks," said David Gilmore, partner at FX Analytics in Essex, Connecticut.

"Markets are starting to wonder if the good times generated from Trump´s tax cuts and deregulation are in the rear view mirror and what´s ahead is fallout from protectionist policies, and that has started to eat into corporate earnings," he added.

The pan-European STOXX 600 was down 1.6 percent after hitting its lowest point since December 2016. China’s main stock indexes resumed a downward spiral a day after the blue-chip index posted its biggest gain in nearly three years, hit by investor pessimism about economic prospects and risks posed by shares pledged for loans.

There is growing unease meanwhile about Italy´s row with the EU over its purse-busting budget, which Brussels said breaks the bloc´s financial rules.

The populist government in Rome has refused to back down and cut its spending promises despite warnings about the country´s economic outlook.

Frankfurt was dragged down by a plunge in the share price of chemicals and pharmaceuticals giant Bayer after a San Francisco judge on Monday upheld a jury verdict that found Bayer-owned Monsanto liable for not warning a groundskeeper that its weed killer product Roundup might cause cancer.

Judge Suzanne Bolanos denied Monsanto´s request for a new trial but cut the $289 million damages award to $78 million to comply with the law regarding how punitive damages awards must be calculated.

Bayer said it would appeal the latest ruling.

MSCI´s gauge of stocks across the globe shed 2.05 percent and hit its lowest point since Sept 2017.Investors were anxious about the economic ramifications of Saudi Arabia´s isolation after Turkish President Tayyip Erdogan said intelligence and security institutions have evidence Khashoggi´s death at a Saudi consulate in Istanbul this month was planned.

He dismissed attempts by Riyadh to blame the "savage" killing on rogue operatives.

U.S. President Donald Trump said Monday that he was not satisfied with what he heard from Saudi Arabia about the death but did not want to lose investment from Riyadh.

"A quick Google search reveals hundreds of U.S. companies that could be impacted if this thing spins completely out of control," said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York in a research note that pointed to defense companies being particularly vulnerable.