Trading volume remains tepid following Labor Day holiday on Monday
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U.S. stocks closed firmly lower on Tuesday, with the S&P 500 snapping a six-day winning streak, as investors focused on heightened tensions between the West and North Korea and worries about a lack of progress on President Donald Trump's pro-growth agenda.
Low trading volume, particularly as investors returned from a holiday-lengthened Labor Day weekend, added to the downbeat tone on Wall Street.
After four straight days of gains, the Dow Jones Industrial Average fell 234.25 points, or 1.1%, to finish at 21,753.31. The S&P 500 shed 18.70 points, or 0.8%, to close at 2,457.85, with eight of the large-cap index's sectors ending in the red.
The Nasdaq Composite Index declined 59.76 points, or 0.9%, to close at 6,375.57.
"People are getting a little more nervous on the margin--not just the geopolitical stuff--over whether tax reforms and pro-business policies will get done," said Ian Winer, head of the equities division at Wedbush Securities.
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Investors are rotating out of sectors that would have benefited from deregulation, such as financials, and moving into bonds, according to Winer. "People today seem to feel that things won't get done or get watered down," he said.
Underlining Tuesday's run to haven assets and concerns about fiscal-policy progress, the 10-year benchmark (http://www.marketwatch.com/story/treasury-yields-slip-as-north-korea-triggers-demand-for-havens-2017-09-05) Treasury yield fell 9 basis points to 2.07%. Bond yields move inversely to prices.
"I didn't see a reason for us to go up as much as we did last week, so I think a big part of today's move is people taking profits off the table. To the extent that geopolitics are impacting the market, I think it will be in short-term back-and-forth movements," said Katrina Lamb, head of investment strategy and research at MV Financial.
"Valuations are expensive, but that doesn't mean things are automatically due for a pullback anytime soon. There hasn't been a major structural shift in the market, so I would encourage investors to keep an eye on things, but not to get too defensive."
Read: The stock market is back near records--but its stiffest headwinds are ahead (http://www.marketwatch.com/story/the-stock-market-is-back-near-recordsbut-its-stiffest-headwinds-are-ahead-2017-09-02)
The standoff between North Korea and the U.S. and its allies escalated over the weekend after Pyongyang said it had successfully tested its largest-ever nuclear bomb (http://www.marketwatch.com/story/north-korea-hails-perfect-success-of-latest-nuclear-test-triggering-magnitude-63-earthquake-2017-09-03). The isolated regime is said to be ready to launch a new intercontinental ballistic missile (http://www.marketwatch.com/story/north-korea-is-getting-ready-for-another-possible-icbm-launch-says-south-korea-2017-09-04) as soon as Sept. 9 when the country celebrates its founding day.
The latest in Pyongyang's series of missile and bomb tests has hardened the rhetoric from the U.S. Defense Secretary Jim Mattis warned North Korea that it would be met "with a massive military response" (http://www.marketwatch.com/story/we-have-many-military-options-mattis-warns-north-korea-2017-09-03) if it attacks the U.S., South Korea or Japan, while Nikki Haley, the U.S. ambassador to the United Nations, said at a UN Security Council emergency meeting that Kim Jong Un was "begging for war." (http://www.marketwatch.com/story/nikki-haley-says-kim-jong-un-appears-to-be-begging-for-war-2017-09-04)
See:How North Korea's nuclear test rattled markets--in 5 charts (http://www.marketwatch.com/story/how-north-koreas-nuclear-test-rattled-markets-in-5-charts-2017-09-04)
Gold futures settled 1.1% higher (http://www.marketwatch.com/story/gold-boosted-by-north-korea-jitters-nears-1-year-high-2017-09-05)and the yen continued to rise, with the dollar buying Yen108.80, down from Yen109.73 late Monday in New York. Gold and the yen are frequently viewed as haven assets.
Fed speakers and economic news: Fed Gov. Lael Brainard said the Fed may have to slow down its pace of interest-rate hikes (http://www.marketwatch.com/story/fed-may-have-to-slow-interest-rate-hikes-given-subdued-inflation-brainard-2017-09-05), citing the recent low readings for inflation. She indicated that if low inflation "proves transitory," then the central bank may continue its current expected pace, for one additional hike in 2017 and three in 2018.
Minneapolis Fed President Neel Kashkari said Tuesday it is very possible that the central bank's four interest-rate hikes (http://www.marketwatch.com/story/feds-kashkari-says-very-possible-rate-hikes-doing-real-harm-to-economy-2017-09-05) since late 2015 could now be doing "real harm" to the economy.
At 7 p.m. Eastern, Dallas Fed President Robert Kaplan will participate in a moderated Q&A session in Dallas.
On the data front, factory orders for July slumped 3.3% (http://www.marketwatch.com/story/factory-orders-for-july-slump-as-boeing-boost-reverses-2017-09-05) after being propelled in the previous month by a flurry of orders for Boeing aircraft.
Stock movers: Shares of United Technologies Corp.(UTX) sank 5.7% after the industrial conglomerate said late Monday it had reached a deal to buy airplane-parts maker (http://www.marketwatch.com/story/united-technologies-seals-23-billion-deal-to-buy-rockwell-collins-2017-09-05)Rockwell Collins Inc.(COL) for $23 billion, in the biggest aerospace deal in history. Rockwell shares rose 0.3%. News of a potential deal first surfaced last month (http://www.marketwatch.com/story/united-technologies-closing-in-on-20-billion-deal-for-rockwell-2017-08-29).
Insmed Inc.(INSM) rocketed 120% after the biotech firm said its study into NTM lung disease met its primary endpoint and it now plans to request a priority review and accelerated approval.
U.S.-listed shares of Cellectis SA tanked 20% after the Food and Drug Administration ordered the French cell therapy specialist to put a cancer-drug trial on hold.
U.S.-listed shares of Merck KGaA(MRK.XE) rose 2.2% after the German pharma giant put its consumer-health business up for sale (http://www.marketwatch.com/story/merck-rises-2-after-health-business-is-put-up-for-sale-2017-09-05).
Other markets:Asian markets closed mixed (http://www.marketwatch.com/story/wary-investors-weigh-on-asian-markets-after-north-korean-nuclear-test-2017-09-03), with South Korea's Kospi index edging lower while stocks in China rose. European stocks were pressured (http://www.marketwatch.com/story/european-stocks-push-higher-as-deal-news-eclipses-north-korea-worries-2017-09-05) but Germany's DAX ended higher.
Oil prices (http://www.marketwatch.com/story/oil-prices-rally-gasoline-slumps-as-gulf-coast-refineries-come-back-after-harvey-2017-09-05) rallied, bolstering energy stocks, but gasoline futures slumped as more refineries powered up operations after Hurricane Harvey.
--Sara Sjolin contributed to this article.
(END) Dow Jones Newswires
September 05, 2017 16:36 ET (20:36 GMT)