Stocks fizzle after early gains, suffer 1st loss in 6 days
U.S. stocks fell Tuesday for the first time in six days after the recent upward momentum gave way to lingering concerns about the U.S. trade war with China.
Defense contractors suffered steep declines and technology stocks gave up most of their early gains, taking the steam out of an early rally on Wall Street. The Dow Jones Industrial Average closed with a loss of 14 points after rising as many as 186 in the morning.
The market had rallied for five straight days since the Federal Reserve signaled it is open to cutting interest rates if needed to stabilize the economy rattled by trade disputes. The gains had erased much of the S&P 500’s 6.6 percent decline in May. But Tuesday, concerns that the U.S. trade spat with China could be prolonged and hurt growth in the world’s two biggest economies dimmed investor enthusiasm.
Katie Nixon, chief investment officer at Northern Trust Wealth Management, said there is no clear resolution in sight to the trade war and investors will have to get accustomed to uncertainty hanging over the market.
“The market’s going to be really sensitive to trade news,” she said. “This is going to be very hard to resolve neatly and quickly.”
President Donald Trump has said he plans to meet with Chinese President Xi Jinping at the Group of 20 summit late this month in Osaka, Japan. But Trump reiterated Tuesday that if the two can’t reach an agreement on trade, he’ll proceed with tariffs on $300 billion in imports from China that aren’t already subject to tariffs.
Defense companies were the biggest decliners in the S&P 500. The market on Monday welcomed news of a megamerger between Raytheon and United Technologies, but the stocks dropped sharply Tuesday. Raytheon lost 5.1 percent and United Technologies shed 4 percent. L3 Technologies fell 4.4 percent and Harris Corp. dropped 4.3 percent. On Monday, Trump expressed some reservations about the Raytheon-United Technologies tie-up.
Technology stocks also gave up some early gains. Adobe fell 1.6 percent and Advanced Micro Devices fell 2.5 percent. The tech sector is still nearly 24 percent so far this year, the best performer among the 11 sectors in the S&P 500.
Consumer-focused stocks and internet companies were among the gainers. Facebook rose 1.9 percent and Verizon gained 1.2 percent. Walgreens rose 1.1 percent and Dollar Tree rose 2.7 percent.
The S&P 500 slipped 1.01 point, or 0.03 percent, to 2,885.72. The Dow fell 14.17 points, or 0.1 percent, to 26,048.51. The Nasdaq composite slipped 0.60 of a point to end at 7,822.57. The Russell
2000 index of small companies fell
4.45 points, or 0.3 percent, to
1,519.11.
John Lynch, chief investment strategist at LPL Research, said in a note to clients that a trade deal with China “is unlikely until more economic pain is incurred by both China and the United States.” That pain will eventually push the two sides to strike a deal, he said.
Both Lynch and Nixon said that the longer the trade war goes on, and tariffs are in place against Chinese goods, the more likely it is that the Fed will cut rates. The futures market is indicating that investors expect the Fed to cut its benchmark interest rate as early as its July policy meeting.