By William Watts, MarketWatch , Joy Wiltermuth
Key stocks behind record highs lose ground
U.S. stocks slid lower Tuesday after Federal Reserve Chairman Jerome Powell said the central banks was still monitoring the economy for signs of weakness and would seek to avoid a knee-jerk reaction in terms of cutting benchmark interest rates.
The Dow Jones Industrial Average fell almost 0.7%, or 179 points, to end around 26,548, while the S&P 500 index lost 28 points, or 1%, to 2,917. The Nasdaq Composite Index gave up 121 points, or 1.5%, to 7,885, extending its losing streak into a third day.
Stocks that led the selloff include shares of Discovery Inc. (DISCA) , TripAdvisor Inc. (TRIP) and Viacom Inc. (VIA) , which all closed the day lower by at least 3%.
Stocks fell earlier on Tuesday after fresh U.S. housing and consumer confidence data came in weaker than expected, which potentially could give the Federal Reserve more ammunition to cut rates in the near future.
They slipped further after St. Louis Fed President James Bullard said he was not in favor of a "huge action" on rates in July.
Read: Fed's Bullard says he is not in favor of half point rate cut in July (http://www.marketwatch.com/story/feds-bullard-says-he-is-not-in-favor-of-half-point-rate-cut-in-july-2019-06-25)
Powell, who was speaking at the Council on Foreign Relations in New York, took a more measured approach than Bullard, signaling only that an interest-rate cut in July is not a done deal.
Check out: Powell says the Fed is 'grappling' with whether to cut interest rates (http://www.marketwatch.com/story/powell-says-the-fed-is-grappling-with-whether-to-cut-interest-rates-2019-06-25)
Wall Street currently has the odds of a rate cut in July at 100%, according to the CME Group's FedWatch tool.
"I think this is a time when the Fed gave us a one-two punch," said Bruce McCain, chief investment strategist at Key Private Bank, adding that Powell has signaled the Fed would be data-orientated and that it doesn't see a clear reason to cut rates at this point.
"The hard part is that most indicators show a slowing of growth in the U.S., but not evidence of a clear tilt toward recession. The market is well ahead of that the Fed is willing to do."
Uncertainty is the nemesis of the market, said Ernie Cecilia, chief investment officer at Bryn Mawr Trust, in a telephone interview.
"Some of the same names that had driven the market to highs yesterday are taking the market down today," he said.
Meanwhile, U.S. home sales fell 7.8% in May (http://www.marketwatch.com/story/new-home-sales-fall-for-the-second-month-but-year-to-date-pace-is-still-up-2019-06-25) versus April, even as median home prices have dipped compared with a year ago, new Commerce Department data showed. Americans also are feeling less optimistic about the economy, with the consumer confidence index missing estimates for June and skidding to 121.5, its lowest point since September 2017 (http://www.marketwatch.com/story/consumer-confidence-falls-to-lowest-level-in-21-months-2019-06-25).
"The data is not great," said Karyn Cavanaugh, senior market strategist at Voya Investment Management Financial, in an interview. "But just because it's not good, doesn't mean it's bad. We know that there's been a global economic slowdown."
Attention now will turn to this weekend's expected meeting between President Donald Trump and Chinese President Xi Jinping amid growing hopes for cease-fire in the U.S.-China trade war.
Stocks have rallied in June, fueled in part by growing expectations the Federal Reserve will deliver an interest-rate cut as early as next month, with perhaps additional easing by year's end. Last week's Fed policy meeting, and remarks by Powell, reaffirmed those expectations. Moves toward easing by other major central banks have also been credited with lifting sentiment.
Also read:How the stock-market rally could turn into another case of 'FOMO' (http://www.marketwatch.com/story/how-the-stock-market-rally-could-spark-a-fomo-rerun-2019-06-25)
"China really has been doing everything it can to stimulate its economy," Cavanaugh said. "Now with the Fed and other central banks potentially easing, the stimulus has a chance to gain some traction."
Trump and Xi will likely meet Saturday on the sidelines of the G-20 meeting. Expectations that they will agree at least to a cease-fire that would avert the imposition of tariffs on a further $300 billion of Chinese imports have also been credited with lifting stocks, though some analysts view those hopes as misplaced.
See:Why stock-market bulls see their summer riding on the Trump-Xi trade meeting (http://www.marketwatch.com/story/how-the-trump-xi-trade-meeting-could-set-the-stock-market-tone-for-the-summer-2019-06-22)
"The recent G-7 central-bank market rally is stalling as the market does not seem that confident of a Trump/Xi Jinping trade breakthrough at this week's G-20 gathering," said Dean Popplewell, vice president of market analysis at Oanda, in a note.
Meanwhile, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke by phone with Chinese Vice Premier Liu He on Monday, Bloomberg News reported (https://www.bloomberg.com/news/articles/2019-06-24/lighthizer-spoke-with-china-s-liu-he-monday-by-phone-ustr-says-jxb06q07?cmpid=BBD062519_MKT&utm_medium=email&utm_source=newsletter&utm_term=190625&utm_campaign=markets), with China's commerce ministry saying they had agreed to continue communicating.
Investors are also watching the Middle East, with continuing tensions between the U.S. and Iran driving gold prices toward a six-year high. Iran said Trump's decision Monday to impose additional sanctions (http://www.marketwatch.com/story/trump-signs-executive-order-imposing-financial-sanctions-against-iranian-leaders-2019-06-24) on Iran had closed the door to diplomatic negotiations. Iran last week downed a U.S. military drone near the Strait of Hormuz, a key oil transportation choke point, and has been blamed by Washington for attacks on tankers in the area. Iran has denied responsibility for the tanker attacks.
Home prices in April rose at their slowest pace (http://www.marketwatch.com/story/home-prices-were-flat-in-april-case-shiller-says-2019-06-25) since August 2012, marking the 13th month in a row of slower annual growth, according to the S&P CoreLogic Case-Shiller 20-city index.
Stocks on the move
Shares of Allergan PLC(AGN) soared almost 25% after AbbVie Inc.(ABBV) said it agreed to buy (http://www.marketwatch.com/story/abbvie-confirms-deal-to-buy-allergan-for-45-premium-valuing-allergan-at-617-billion-2019-06-25) the pharmaceutical company in a deal valued at $63 billion. AbbVie shares were off nearly 16%.
Read:Allergan acquisition is a 'major bailout' for shareholders, analysts say (http://www.marketwatch.com/story/allergan-acquisition-is-a-major-bailout-for-shareholders-according-to-analysts-2019-06-25)
FedEx Corp. (FDX) is scheduled to report fourth-quarter results () after the closing bell. Separately, the company, after previously botching deliveries for Huawei Technologies, filed a lawsuit on Monday (http://www.marketwatch.com/story/fedex-sues-government-over-order-to-block-shipments-to-huawei-2019-06-24) to stop the U.S. government from requiring the package giant to enforce a crackdown on the Chinese telecom-equipment maker.
Shares of home builder Lennar Corp.(LEN) dipped almost 6% after notching a gain in trading after reporting second-quarter earnings and revenue well above expectations (http://www.marketwatch.com/story/lennars-stock-surges-after-big-profit-revenue-beats-2019-06-25).
Grubhub Inc. shares (GRUB) were up 5% after Citi Research analyst Mark May upgraded the stock (http://www.marketwatch.com/story/grubhub-stock-jumps-after-citi-upgrade-2019-06-25) to buy from hold, citing the food-delivery company's ability to continue to expand food sales.
(END) Dow Jones Newswires
June 25, 2019 16:11 ET (20:11 GMT)
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