MARKET SNAPSHOT: U.S. Stock-market Losses Led By Momentum Plays

By Anora Mahmudova and Victor Reklaitis, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks sold off on Tuesday with so-called high-growth momentum plays hit hardest, while the Dow Jones Industrial Average and S&P 500 retreated further from recent peaks.

Biotechnology, Internet and small-cap companies saw their shares drop sharply for the second day, dragging the rest of the market with them.

The Dow Jones Industrial Average(DJI) dropped 91 points, or 0.5%, to 16,934.83, while the S&P 500(SPX) shed 10 points, or 0.5%, to 1,967.26. The Nasdaq Composite(RIXF) lost 51.46 points, or 1.1%, to 4,400.33. The iShares Nasdaq Biotechnology ETF (IBB) fell 2%, while Global X Social Media Index ETF (SOCL) fell 3.4%..

Rob Stein, CEO of Astor Investment Management, said that Tuesday's pullback is mostly due to technicals rather than fundamentals.

"When markets reach new peaks, investors tend to take opportunity and lighten up and rebalance. We think the economy is in its mid cycle and has more room to grow. In this environment our risk-reward model is still favoring stocks with decent expected returns for the next several quarters," Stein said.

Earnings season will get its unofficial kickoff after the market's close, as Alcoa Inc. releases its second-quarter results. Tuesday is expected to be light on top-tier economic releases, although job openings data and two Federal Reserve speakers are on tap.

Before Tuesday's open, a small-business optimism index showed a June dip amid a big fall in those who expect the economy to improve. Job openings at U.S. workplaces rose to 4.64 million in May -- the most since June 2007 -- from 4.46 million in April, the U.S. Department of Labor reported Tuesday. (Read more: Two of Yellen's favorite jobs indicators are coming Tuesday http://blogs.marketwatch.com/capitolreport/2014/07/07/two-of-yellens-favorite-jobs-indicators-are-coming-tuesday/?link=instory.)

Richmond Federal Reserve President Jeffrey Lacker said the Fed must be pre-emptive, hiking rates before inflation emerges. Eastern and Minneapolis Fed President Narayana Kocherlakota is scheduled to speak at 1:45 p.m.

After the close, Alcoa (AA) is forecast to report per-share earnings of 12 cents on revenue of $5.61 billion for the second quarter. Shares were down 1%. Check out: What to watch for in Alcoa earnings.

Among individual stocks, Groupon Inc.(GRPN) initially jumped after B. Riley upgraded the daily-deals site to buy, but reversed gains and traded 2% lower. Delta Air Lines Inc.(DAL) was lower again, sliding 3.2%, after dropping sharply in two of the past three sessions. (Read more in the Movers & Shakers column http://www.marketwatch.com/story/alcoa-allergan-and-petsmart-are-stocks-to-watch-2014-07-07.)

In other markets, the Nikkei 225 index closed down 0.4%, though the rest of Asia largely held steady. The Stoxx Europe 600 pulled back after weak German trade data supported the view that economic activity in the country is slowing.

Gold prices (GCQ4) pushed lower, while crude oil also slipped. The British pound (GBPUSD)slipped on unexpectedly weak U.K. factory data.

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