Stocks tumble on Powell's balance sheet comments and as trade hopes fade

U.S. stocks fell Tuesday as expectations faded that this week's trade talks would produce a deal and after Fed Chairman Jerome Powell said the central bank will "soon" start increasing the size of its balance sheet.

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Powell, in a question and answer session, said policymakers will "soon announce measures to add to the supply of reserves over time." The Fed amassed a $4.5 trillion balance sheet in the aftermath of the Great Financial Crisis, and in an effort to normalize policy began reducing its size in June 2017.

His remarks followed more downbeat news on trade talks between the U.S.-China, including word that Chinese Vice Premier Liu He, who is leading the delegation, has not been designated as a special envoy, meaning he cannot make any decisions and must report to President XI Jinping. Deputy-level talks began Tuesday in Washington, and higher-level talks are set to start on Thursday.

All three of the major U.S. indexes finished at session lows, with the Dow Jones Industrial Average down 313 points, or over 1 percent.

TickerSecurityLastChangeChange %
I:DJIDOW JONES AVERAGES27766.29-54.80-0.20%
SP500S&P 5003103.54-4.92-0.16%
I:COMPNASDAQ COMPOSITE INDEX8506.211039-20.52-0.24%

U.S.-listed Chinese companies were down broadly on a Bloomberg report that the White House is considering restricting government pension fund investments in them. Alibaba, Baidu and JD.com were among the names that fell.

TickerSecurityLastChangeChange %
BABAALIBABA GROUP HOLDING LTD184.86+2.51+1.38%
BIDUBAIDU INC.115.65+0.85+0.74%
JDJD.COM INC32.17+0.49+1.55%

Also impacting trade was the U.S. adding 28 Chinese companies to its entity list on Monday evening, sparking concerns that China might retaliate. Inclusion on the list, which designates companies believed to act in ways contrary to U.S. foreign policy or national security interests, restrictions access to American goods.

Chipmakers were among the hardest hit, but industrials were also weaker.

TickerSecurityLastChangeChange %
NVDANVIDIA CORPORATION210.18-1.00-0.47%
AMDADVANCED MICRO DEVICES INC.39.52-1.46-3.56%
CATCATERPILLAR INC.143.36+1.84+1.30%

Elsewhere, Boeing shares fell after The Wall Street Journal reported the European Union Aviation Safety Agency may withhold support for the 737 MAX's return to the skies due to some concerns over fixes to the plane's flight-control systems.

TickerSecurityLastChangeChange %
BABOEING COMPANY366.44-4.47-1.21%

On the earnings front, Domino's Pizza rebounded after reporting same-store sales, earnings and revenue all fell short of Wall Street estimates. CEO Ritch Allison soothed investor angst on the earnings call.

TickerSecurityLastChangeChange %
DPZDOMINOS PIZZA INC284.05-4.19-1.45%

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Chinese markets resumed trading on Tuesday after a week-long holiday, with the Shanghai Composite climbing 0.3 percent. Meanwhile, Japan's Nikkei 225 gained 1 percent.

In Europe, Germany's DAX led declines, down 0.8 percent.

Ken Martin contributed to this article.