Stocks lost some early momentum Tuesday and finished with their first loss in six days and more in Tuesday’s Stock Market Update.
Shares of defense contractors led the declines. Raytheon and United Technologies, which have agreed to merge, fell sharply and other defense companies dropped as well. Raytheon lost 5.1%.
Technology stocks turned lower after leading the market earlier. Adobe fell 1.5% and Advanced Micro Devices fell 2.4%.
Consumer-related stocks and internet companies balanced the market with gains. Facebook rose 1.8% and Verizon gained 1.2%. Walgreens rose 1.1% and Dollar Tree rose 2.6%.
Stocks had been rallying since last week, when the Federal Reserve signaled that it is open to cutting rates to stabilize the economy if trade disputes threaten the economic recovery. A lackluster U.S. jobs report appeared to increase the odds that a rate cut will happen sooner rather than later.
Investors grew more hopeful Monday after President Donald Trump suspended plans to impose tariffs on Mexican goods after the countries struck a deal on immigration. Trump also plans to meet with Chinese President Xi Jinping in Japan later this month to discuss the two countries’ ongoing trade war.
STOCK MARKET UPDATE
KEEPING SCORE: The S&P 500 index slipped 1 point to 2,885. The benchmark index is still up nearly 5% so far this month after dropping 6.6% in May. The Dow Jones industrials slipped 14 points, or 0.1%, to 26,048, after rising as much as 186 points just after trading began. The Nasdaq dropped less than a point and is at 7,822. The Russell 2000 index of small companies fell 5 points to 1,518.
ANALYST’S TAKE: The trade war between the U.S. and China has no neat resolution in sight and investors will have to get use to uncertainty hanging over the market.
“The market’s going to be really sensitive to trade news,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “This is going to be very hard to resolve neatly and quickly.”
The dispute has highlighted just how complex global supply chains and intertwining national interests have become, she said.
The U.S. and Chinese economies were already on a path for slower growth before the trade war, she said, but the escalation and uncertainty have added “fragility” in the growth outlook.
“The concern is that because of the trade standoff, more companies will hunker down and delay spending and hiring,” she said.
Meanwhile, The bond market has been sending the Fed a clear message that the central bank is behind the curve on lowering rates. The volatile market, weak economic data and higher bond prices are all potential catalysts for a rate change.
“The tea leaves are all there for them to read, if they want to read them,” she said.
TRIMMING THE (FAUX) FAT: Beyond Meat fell 25.02% after J.P. Morgan’s Ken Goldman and James Allen downgraded the stock to “neutral.” The downgrade follows a surge in the stock price from $25 to $167 since the maker of plant-based meat alternatives started trading publicly on May 2.
The sharp rise in price cost short sellers about $400 million, according to the research firm S3.
In a note to clients Tuesday, Goldman and Allen said the downgrade was “purely a valuation call.”
HAPPY RETURNS: Tax preparer H&R Block rose 3.1% after hitting investors with a triple-dose of solidly good news. The company beat fiscal fourth quarter profit expectations, raised its quarterly dividend and announced an acquisition.
GOOD GRUB: GrubHub jumped 8.2% after the online food service company got some relief from competitive pressures.
Amazon is closing its U.S. restaurant delivery service, a 4-year-old business that failed to take off. The sector is highly competitive and includes Uber Eats and Door Dash, along with GrubHub and others.
The service, called Amazon Restaurants, offered delivery in more than 20 cities in the U.S. It was expanded into the United Kingdom, but Amazon shut it down late last year.
DEFENSE DOWN: Defense contractors dragged down the broader industrial sector. The slide marks a reverse from a day earlier when Raytheon and United Technologies announced a megadeal that will create a defense contracting powerhouse. Raytheon fell 5.1% and United Technologies fell 3.9%
Several other defense contractors turned lower in midday trading. Lockheed Martin fell 2.1% and Northrop Grumman fell 3.4%.
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