Stocks got hammered Tuesday, with the Dow Jones industrial average falling nearly 800 points, as investors worried about trade tensions and slower growth.
Shares of almost all companies with importance for Louisvillians also fell, with UPS, the largest local employer, seeing the largest drop, of nearly 7.4 percent, after Morgan Stanley warned that Amazon Air could take a bite out of the logistics markets to the detriment of UPS and FedEx. UPS has told Insider that the market overall is still growing, and that starting an airline to rival those of the current big players is a big undertaking.
The Dow closed down 3.1 percent. The broader S&P 500 index fell 3.24 percent.
Of 14 local stocks tracked by Insider, only one, Apellis Pharmaceuticals, booked a gain Tuesday, based on good news from its drug trials. Shares of the early-stage pharmaceutical concern had spiked on the news on Monday.
Financial stocks on Tuesday got hit particularly hard — Louisville-based Stock Yards Bancorp and Republic Bancorp were both down more than 5 percent — suggesting that banks could face some difficulties from slower housing and automotive sales.
Shares of Brown-Forman were not far behind, falling 4.65 percent, as the Louisville-based distiller is particularly sensitive to deteriorating trade relations.
Tensions between the U.S. and China appeared to be slacking on Monday, leading to a market rally, but the extent of an alleged agreement between the two countries was less clear on Tuesday, with President Donald Trump calling himself “a Tariff Man” in a tweet.
Brown-Forman generates more than half of its revenue overseas. Global distillers had traveled to Louisville this summer, warning that a prolonged trade war would threaten global partnerships, distillery profits, innovation, farmers, tourism-dependent business and consumers.
Brown-Forman likely will address the matter Wednesday in its third-quarter earnings call.
Developments on the bond market also are stoking recession fears. As investors sell stocks, they are increasingly putting their money in less risky investments, such as long-term Treasury bonds. As prices on those bonds rise — and yields fall — the difference in yields between 10-year and two-year bonds diminishes. Two-year bonds generally follow rates set by the Federal Reserve, which have risen this year.
The difference, or spread, between the two bond yields fell to 0.12 percentage points on Tuesday, moving close to a negative spread. That phenomenon, also called an inverted yield curve, is a reliable recession predictor. According to the Fed, “Every U.S. recession in the past 60 years was preceded by a negative term spread, that is, an inverted yield curve.”