Stocks fall and bond yields hit record lows, driven by worries about Britain

U.S. stocks slumped Tuesday as investors grew fearful over the health of the British financial system. Looking for safety, they flocked to Treasury notes and pushed the yields on long-term U.S. government bonds to all-time lows. Energy companies took the biggest losses as oil prices tumbled.

Investors were jolted after three British financial firms stopped trading in their commercial property funds because large numbers of investors were trying to liquidate their holdings.

Stocks mostly fell, although investors bought shares of companies seen as safe plays, such as household goods makers and utilities. Bond yields plunged, with the 10-year and 30-year Treasury yields reaching record-low levels as demand for Treasuries rose and prices jumped.

It was an abrupt end to a big four-day rally for stocks and a reminder that the effects of Britain’s vote to leave the European Union have left markets deeply unsettled. Answers may be very slow in coming.

“We’ve seen a tremendous rally pretty much every night in longer-term bonds” since the June 23 vote, said Tom di Galoma, managing director at Seaport Global Holdings. “There’s just so many unanswered questions both from the legal standpoint, a diplomatic standpoint, an economic standpoint.”

The Dow Jones industrial average fell 108.75 points, or 0.6%, to 17,840.62. The Standard & Poor’s 500 index slid 14.40 points, or 0.7%, to 2,088.55. The Nasdaq composite sank 39.67 points, or 0.8%, to 4,822.90. U.S. markets were closed Monday for the Independence Day holiday.

Stocks took a steep two-day plunge last month after Britain voted to leave the European Union. Over the four days that ended Friday, they recovered almost all of the ground they lost after the vote.

On Tuesday the trouble began when Aviva Investors, Standard Life and M&G Investments stopped trading in their commercial property funds. The firms said they were protecting other investors who wished to remain in their respective funds. The Bank of England said it eased bank rules to allow them to lend up to $200 billion to households and businesses.

The pound fell to $1.3032 from $1.3259, its weakest in 31 years.

In the U.S., the yield on the 10-year note dropped to 1.38% in late trading, down from 1.45% late Friday. It went as low as 1.36% during the day, according to Tradeweb. The yield on the 30-year note fell to 2.16%. It was 2.24% Friday.

According to Tradeweb, the yields on the 10-year and 30-year Treasury notes are both at all-time lows. They’ve tumbled this year as worries about the global economy, the U.S. Federal Reserve and now Britain have investors craving safety.

Other traditionally steady investments also did well. Gold rose $19.70, or 1.5%, to $1,358.70 an ounce. Silver advanced 32 cents, or 1.6%, to $19.91 an ounce. Copper fell 3 cents to $2.18 a pound. Gold is at its highest price in more than two years and silver is the highest it’s been since August 2014.

Benchmark U.S. crude sank $2.39, or 4.9%, to close at $46.60 a barrel in New York. Brent crude, used to price international oils, fell $2.14, or 4.3%, to close at $47.96 a barrel in London. That pulled energy companies lower. Halliburton shares sank 4.5% to $43.53, ConocoPhillips dropped 4.2% to $41.70 and Schlumberger retreated 2.4% to $77.63.

Lower bond yields translate to lower interest rates on many kinds of loans such as mortgages, and that hurts bank profits. Citigroup shares declined 3.3% to $40.78 and Goldman Sachs fell 2.6% to $144.45.

Chemical and mining companies also took large losses. But the types of stocks that are generally considered the safest traded higher. Those included household goods companies. Clorox advanced 1.5% to $139.24 and Coca-Cola rose 0.7% to $45.43.

In other energy trading, wholesale gasoline fell 8 cents, or 5.6%, to $1.43 a gallon. Heating oil fell 7 cents, or 4.4%, to $1.45 a gallon. Natural gas dropped 22 cents, or 7.5%, to $2.76 per 1,000 cubic feet.

A majority stake in Hostess Brands, the company that makes Twinkies and Ding Dongs, is being acquired by Gores Holdings. Gores will pay $375 million in cash and commit an additional $350 million in the deal. Hostess filed for Chapter 11 bankruptcy protection four years ago. Gores Holdings is an acquisition company run by the private equity firm Gores Group. The holding company’s stock rose 2.4% to $10.01.

Insys Therapeutics jumped 7% to $14.40 after the Food and Drug Administration approved its drug Syndros, a synthetic version of THC, a component of marijuana. Syndros is intended to treat severe weight loss in AIDS patients and nausea and vomiting in chemotherapy patients.

Outside the U.S., stock indexes were mostly lower. France’s CAC 40 fell 1.7% and Germany’s DAX lost 1.8%. Britain’s FTSE 100, however, picked up 0.4%. Japan’s benchmark Nikkei 225 sank 0.7% and South Korea’s Kospi fell 0.3%. Hong Kong’s Hang Seng dropped 1.4%.

The dollar fell to 101.49 yen from 102.58 yen. The euro slid to $1.1075 from $1.1125.

UPDATES:

2:52 p.m.: This article was updated with additional details.

1:16 p.m.: This article was updated with closing prices.

7:39 a.m.: This article was updated with more recent prices and additional details.

This article was originally published at 7 a.m.