TWODY Taylor Wimpey PLC (PK)

By Riva Gold and Akane Otani 

U.S. stocks slumped, reversing course after their biggest weekly gain of the year, as crude-oil prices tumbled and government-bond yields plumbed record lows.

After initial losses following the U.K. vote to leave the European Union, global stocks rebounded last week, with the S&P 500 and the Dow Jones Industrial Average both climbing more than 3%. Major U.S. indexes pared those gains Tuesday, with some investors and analysts saying markets weren't yet clear of the fallout.

Investors sold risky assets like commodities in favor of havens like Treasury bonds. The yield on the 10-year U.S. Treasury note settled at a record low of 1.367%, U.S. crude oil dropped 4.9%, to $46.60 a barrel, and gold settled at its highest level since March 2014, up 1.5%, to $1,356.40 a troy ounce.

"It definitely feels like the markets woke up on the wrong side of the bed this morning," said Jason Bloom, director of research and strategy for commodities and alternatives at PowerShares. "Crude oil tends to be the epicenter of the global risk-off sentiment."

The Dow industrials fell 108.75 points, or 0.6%, to 17840.62. The S&P 500 declined 14.40 points, or 0.7%, to 2088.55, and the Nasdaq Composite Index lost 39.67 points, or 0.8%, to 4822.90.

Shares of commodity-linked companies led the day's losses.

The energy sector in the S&P 500 fell 1.9%. Southwestern Energy declined $1.35, or 10%, to $11.66, and Murphy Oil dropped $2.57, or 7.9%, to $30.09.

Oil prices were pressured by data from Friday that showed the number of U.S. rigs drilling for oil increased in the past week, as well as the strengthening dollar, which makes dollar-traded oil more expensive for foreign buyers. The WSJ Dollar Index advanced 0.7%.

The index's financial sector, which fell sharply in the wake of the U.K. vote, lost 1.5%. J.P. Morgan Chase fell 1.71, or 2.8%, to 59.55, and Goldman Sachs Group declined 3.80, or 2.6%, to 144.45, making them among the biggest decliners in the Dow industrials.

With questions lingering about global growth, the U.K.'s future relationship with the EU, and politics abroad, U.S. assets like the dollar and the 10-year Treasury look relatively attractive at the moment, said Jon Adams, senior investment strategist for BMO Global Asset Management.

"Uncertainty about policy is clearly driving the markets right now," Mr. Adams said.

The British pound slumped to a 31-year-low against the dollar. The FTSE 100 index, whose shares have benefited from a weaker pound, gained 0.4%. The Stoxx Europe 600 fell 1.7%.

Japan's Nikkei Stock Average fell 0.7%, snapping a six-session winning streak as the yen climbed against the dollar.

Hong Kong's Hang Seng Index fell 1.5%, while Australia's S&P/ASX 200 index dropped 1% after the central bank left its cash rate unchanged. The Shanghai Composite Index gained 0.6%.

Some analysts cautioned against becoming overly pessimistic about the global economy as a result of U.K. vote. Investors shouldn't necessarily "get too concerned about global growth just because the U.K. is slowing, " said Michael Metcalfe, head of macro strategy at State Street Global Markets.

A more meaningful slowdown from the Brexit vote would likely require possible political contagion in the eurozone or an acceleration of concerns about eurozone banks, Mr. Metcalfe said.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

July 05, 2016 17:26 ET (21:26 GMT)

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