US: Stocks fall after Brussels attacks, paced by airline shares

[NEW YORK] US stocks fell, with transportation shares and banks leading declines following deadly bombings in Brussels that fueled demand for haven assets like Treasuries and gold.

Flights in and out of Brussels were canceled and security precautions were stepped up at travel hubs around Europe after the blasts at the Belgian capital's airport and a subway station killed at least 26 people. Delta Air Lines Inc. and American Airlines Group Inc. declined more than 2.6 per cent. Wells Fargo & Co and Citigroup Inc slipped at least 1.1 per cent.

The Standard & Poor's 500 Index retreated 0.4 per cent to 2,042.72 at 9:54 am in New York, after closing Monday at its highest in nearly three months. The Dow Jones Industrial Average lost 71.81, or 0.4 per cent, to 17,552.06, threatening its longest winning streak since October. The Nasdaq Composite Index sank 0.3 per cent. West Texas Intermediate crude futures fell 1 per cent.

"The reaction so far has been somewhat muted," said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. "We could see a bigger reaction and once we know more about who's behind these major, planned and well-coordinated attacks. Even the biggest bull would say a pullback wouldn't be the worst thing for the market right now."

Declines today would interrupt a five-week rally bolstered by improving economic data, rising crude prices and optimism that central banks around the world will continue to support growth. The S&P 500 has erased the fallout from a tumultuous start to 2016, rebounding 12 per cent since its February low and turning positive for the year last week. The index is among the top three best-performers this year among developed-market benchmarks tracked by Bloomberg.

Despite the comeback, Bank of America Corp. said today that clients were net sellers of $1.4 billion of U.S. stocks in an eighth consecutive week of selling, the longest client-selling streak in five years. That suggests investors still doubt the sustainability of the rally, strategists at the firm said.

The main US equity gauge is heading toward the first monthly increase since November, which would halt the longest streak of declines since 2011. Worries over China's slowdown and routs in oil and banks had dragged the S&P 500 last month to the lowest level since 2014.

The Chicago Board Options Exchange Volatility Index jumped 6 per cent Tuesday to 14.62, after closing yesterday at a seven- month low. The measure of market turbulence known as the VIX is on its way toward a sixth weekly retreat which would be the longest since 2008.

Equities haven't declined since the Federal Reserve last week signaled a slower pace for interest-rate increases. Traders are pricing in a 41 per cent probability for a boost to borrowing costs at the central bank's June meeting, down from about 54 per cent before the Fed released a revised economic outlook last Wednesday. Chicago Fed President Charles Evans is scheduled to speak this afternoon.

BLOOMBERG