Wall Street's primary indexes experienced choppy trading on Tuesday, with rising Treasury yields applying pressure as investors evaluated the potential for interest rate cuts by the Federal Reserve. Despite these losses, an upswing in energy stocks due to higher crude prices provided some offset.
The three major U.S. stock indexes had previously seen gains last week following data that suggested a softening labor market. This led to increased expectations that the Federal Reserve might halt its monetary tightening this month. "Markets (are) wrestling with whether they're going to get a decline in rates... the soft landing scenario is beginning to be called into question," said Hugh Anderson, managing director at HighTower Advisors in Las Vegas.
On Tuesday, the yield on the 10-year Treasury notes climbed to 4.25%, while the two-year yield rose to 4.936%. In addition, China's services activity expanded at its slowest pace in eight months in August, according to a private-sector survey. This affected sentiment as traders returned from the Labor Day holiday.
Shares of Chinese companies listed in the U.S., including PDD Holdings, JD (NASDAQ:JD).com, Baidu (NASDAQ:BIDU), and Alibaba (NYSE:BABA), fell between 0.7% and 2.5%. However, the energy sector was a bright spot, up 1.3% and hitting a seven-month high after Saudi Arabia and Russia announced an extension to their voluntary supply cuts.
The S&P 1500 airlines index lost 1.9%, while utilities led declines among S&P 500 indexes, down nearly 2%. The materials sector, which is heavily exposed to China, fell by 1.2%. Major growth stocks showed mixed performance, with Amazon.com (NASDAQ:AMZN) and Nvidia (NASDAQ:NVDA) down by 1.2% and 0.4%, respectively, while Tesla (NASDAQ:TSLA) gained 3.1%.
Data released on Tuesday showed that orders for U.S. factory goods declined by 2.1% in July, marking an end to a four-month streak of gains. Traders' bets on the Federal Reserve leaving interest rates unchanged at the next policy meeting stood at 93%, while there was a 57.6% chance of a pause in November according to CME Group's (NASDAQ:CME) FedWatch tool.
Federal Reserve Governor Christopher Waller stated on Tuesday that he currently sees no factors that would necessitate boosting short-term borrowing costs again. Meanwhile, Goldman Sachs (NYSE:GS) reduced its prediction of a U.S recession occurring within the next year from 20% to 15%.
At 11:42 a.m. ET on Tuesday, the Dow Jones Industrial Average was down by 64.72 points (0.19%) at 34,772.99; the S&P 500 was down by 11.85 points (0.26%) at 4,503.92; and the Nasdaq Composite was down by 25.83 points (0.18%) at 14,005.99.
Shares of Airbnb (NASDAQ:ABNB) and Blackstone (NYSE:BX) increased by 7.7% and 3.6%, respectively, as both companies were set to join the S&P 500 index soon. Oracle (NYSE:ORCL) saw a gain of 2% after Barclays (LON:BARC) upgraded the software firm from "equal weight" to "overweight".
Declining issues outnumbered advancing ones with a ratio of 3.02-to-1 on NYSE and a ratio of 2.08-to-1 on Nasdaq.
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