Trading volume remains tepid
U.S. stocks retreated Tuesday, with major indexes on track to end multiday winning streaks, as investors fretted over the lack of progress in the Trump administration's pro-growth agenda and on heightened tensions between the West and North Korea.
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Low trading volume, particularly as investors returned from a holiday-lengthened weekend, added to the tepid tone on Wall Street.
The Dow Jones Industrial Average fell 236 points, or 1.1%, to 21,749. The S&P 500 lost 25 points, or 1%, to 2,451. The Nasdaq Composite Index was down 87 points, or 1.4%, to 6,347.
The S&P 500 is coming off a six-day rally while the Dow has risen for the past four sessions.
"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.
"People today seem to feel that things won't get done or get watered down," he added, noting investors are rotating out of sectors that would have benefitted from deregulation, such as financials, and moving into bonds.
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 8 basis points to 2.081%. Bond yields move inversely to prices.
The day's losses were broad, with nine of the nine S&P 500 sectors lower, led by financials. Among the risers, energy edged up 0.2% while utilities gained 0.2%.
"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."
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 this Saturday 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 rose 0.9% following the latest developments, trading near $1,342 an ounce.
The yen continued to rise, with the dollar buying Yen108.81, down from Yen109.73 late Monday in New York. Japan's currency is frequently seen as a safe-haven asset.
Fed speakers and economic news: Fed Gov. Lael Brainard said that 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.
At 7 p.m. Eastern, Dallas Fed President Robert Kaplan will participate in a moderated Q&A session in Dallas.
"Investors will be looking to assess how stronger than expected economic growth but weaker than forecast labor market data may influence the Fed's monetary policy moving through toward the end of the year," said Fiona Cincotta, market analyst at City Index, in a note.
Check out:Tune in Tuesday morning to hear the thinking of the Fed's inner circle (http://www.marketwatch.com/story/tune-in-early-tuesday-morning-to-hear-the-thinking-of-the-feds-inner-circle-2017-09-01)
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.
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)
Stock movers: Shares of United Technologies Corp.(UTX) sank 4.7% 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 were up 0.5%. 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 99% 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 19% 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 2.3% 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).
After the market closes on Tuesday, Hewlett Packard Enterprise Co.(HPE) is slated to report earnings.
Read:Why Hewlett Packard Enterprise stock plunged Friday (http://www.marketwatch.com/story/why-hewlett-packard-enterprise-stock-plunged-friday-2017-09-01)
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 report.
(END) Dow Jones Newswires
September 05, 2017 12:46 ET (16:46 GMT)