US close: Markets sustain losses as Treasury yields sink

Wall Street trading closed after sustained losses on Wednesday, amid a continuing rapid decline in US Treasury yields and 'market chatter' regarding possible interest rate cuts by the Federal Reserve.

The Dow Jones Industrial Average ended the session down 0.13% at 25,625.59, the S&P 500 lost 0.46% to 2,805.37, and the Nasdaq 100 was off 0.58% at 7,308.19.

At the open, the Dow lost 45 points as the benchmark 10-year Treasury yield was trading at 2.37%, hitting its lowest level since late 2017.

The official daily 10-year Treasury yield sat at 2.39% on Wednesday evening.

RBC Capital Markets said what looked to be the most likely catalyst for the move lower was Donald Trump’s latest nominee for the Federal Reserve, Stephen Moore, calling for an immediate 50 basis points rate cut from the Fed in a New York Times interview.

"This is in contrast with statements from even the dovish side of the FOMC - Evans, Kashkari - who, alongside almost all committee members, have favoured a patient approach and last week’s FOMC dot-plots that showed the Fed Funds median unchanged in 2019," the Canadian bank said.

Meanwhile, CMC Markets analyst Michael Hewson said investors were remaining cautious as bond yields in the US continued to play havoc with the long-term time horizons of market asset allocation decisions.

"In the space of a month the centre of the US yield curve has collapsed below the front end in a manner resembling a U shape, raising concerns that a sharp global recession could be in the offing," he said.

On the data front, America's shortfall in trade on goods and services with the rest of the world saw a massive drop at the start of 2019, amid a sharp decline in purchases from abroad.

According to the Department of Commerce, the US foreign trade balance in goods and services shrank by 14.6% month-on-month to reach $51.1bn, against consensus expectations for $57.3bn.

Total imports were especially weak, retreating by 2.6% versus January to $258.5bn, while exports rose by 0.9% to $207.3bn.

An $8.2bn reduction in the deficit on trade in goods to $73.3bn accounted for the bulk of the drop in the total trade deficit, while the services surplus increased by $0.5bn to $22.2bn.

Goods imports dropped by $6.5bn to $210.7bn, led by a decline of $3.0bn in those for capital goods, while those of industrial supplies and materials decreased by $2.3bn.

In corporate news, Axsome Therapeutics finished up 1.88%, having earlier surged nearly 8% after the US Food and Drug Administration gave breakthrough therapy designation to its treatment for major depressive disorder.

Housebuilder Lennar Corporation was up 3.94% at the bell following the release of its first-quarter numbers, and Southwest Airlines flew 2.22% higher despite reducing its first-quarter unit revenue and capacity guidance and lifted its cost outlook.

In deal news, health insurer Centene said it had agreed to buy smaller rival WellCare in a $17.3bn cash and stock deal.

Under the terms of the transaction, which has been unanimously approved by the boards of both companies, Centene will buy WellCare for $305.39 a share.

WellCare shareholders will receive a fixed exchange ratio of 3.38 shares of Centene common stock and $120 in cash for each of their shares.

WellCare shares were up 12.34% by the bell, while Centene stock slumped 4.98%.