U.S. equities got off to a good start on Tuesday, but began declining soon thereafter, finishing the session on a broadly lower note. The S&P 500 and the Dow Jones Industrial Average ended with losses of 0.6% and 0.7%, respectively, while the Nasdaq Composite, which hit new all-time highs in the two prior sessions, dropped 1.0%.
The top-weighted technology and financials sectors, which comprise around 40% of the broader market combined, led Tuesday's tumble, dropping 1.2% and 1.1%, respectively. Cyclical sectors underperformed in general, while some countercyclical groups, like health care (+0.2%) and utilities (+0.2%), actually finished in the green.
Qualcomm (QCOM 59.70, -3.11) was the worst-performing component in the S&P 500 with a loss of 5.0%. The semiconductor giant sold off after President Trump blocked Broadcom's (AVGO 261.22, -1.62) takeover effort, citing risks to national security. Dow component General Electric (GE 14.43, -0.67) also had a disappointing performance, dropping 4.4%, after JP Morgan slashed its price target from $14 to $11, which is the lowest price forecast among the 16 research firms that cover GE.
The major averages were either at, or below, their flat lines by midday, but selling accelerated in the afternoon following a Politico headline that the White House could announce "steep" tariffs and investment restrictions on China as soon as next week. The threat of such action against China has been present for some time, so the headline wasn't unexpected per se. However, it did serve as a sobering reminder that the trade war issue is still simmering and could soon hit a boiling point if China decides to retaliate.
Separately, President Trump ousted Secretary of State Rex Tillerson on Tuesday and nominated CIA Director Mike Pompeo to replace him.
Investors received some key inflation data on Tuesday, the Consumer Price Index for February, and breathed a sigh of relief after it showed that consumer inflation is not accelerating in a worrisome fashion. The CPI increased 0.2% last month, as expected, after rising 0.5% in January. Meanwhile, the core CPI, which is seen as a better long-term gauge of inflation as it excludes the volatile categories of food and energy, also met expectations with a 0.2% month-over-month increase, down from 0.3% in January.
With those monthly changes, total CPI was up 2.2% year over year, which is more than the 2.1% reading registered in January, and core CPI was up 1.8%, unchanged from the 12 months ending January. The Fed aims for a year-over-year increase of 2.0% in core inflation, but prefers to use the PCE Price Index over the CPI.
In the bond market, U.S. Treasuries ended Tuesday on a mostly higher note, with longer-dated issues pacing the advance. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, slipped two basis points to 2.85%. Meanwhile, the 2-yr yield finished flat at 2.26%.
Looking ahead, investors will receive a sizable batch of economic data on Wednesday: Retail Sales for February (Briefing.com consensus +0.3%) and the Producer Price Index for February (Briefing.com consensus +0.1%) will both be released at 8:30 AM ET, while the less influential Business Inventories report for January (Briefing.com consensus +0.6%) will cross the wires at 10:00 AM ET. Also of note, the Energy Information Administration will release its weekly crude inventory report at 10:30 AM ET.
- Nasdaq Composite: +8.8% YTD
- S&P 500: +3.4% YTD
- Dow Jones Industrial Average: +1.2% YTD
- Russell 2000: +3.7% YTD
Headlines provided by Briefing.com