Stocks fall Tuesday as economic news points to fewer rate cuts
U.S. stocks slumped Tuesday as signs of a strong economy sent bond yields higher and investors began to question lofty share prices.
The broad S&P 500 index slid 1.1% to close at 5,909, while the tech-heavy Nasdaq Composite Index gave up 1.9%, or 375 points, to end at about 19,490. The Dow Jones Industrial Average slipped 0.4% to close at 42,528.
A report on economic activity in the services sector showed growth was increasing, and one measure of prices was at its highest in nearly two years. Separately, the Job Openings and Labor Turnover report from the Labor Department showed 8.1 million jobs in November, much stronger than analysts had forecast.
The 10-year U.S. Treasury note jumped 7 basis points to 4.68 in midday trading. Bond yields rise when prices fall, which is more common in periods of rising inflation.
Entering the week, technological innovation seemed to buoy investor sentiment. Jensen Huang, CEO of chipmaker Nvidia, spoke Monday night at the annual Consumer Electronics Show in Las Vegas. Shares of the chipmaker gained 3.5% Monday, but tumbled 6% on Tuesday.
Frothy valuations for tech companies may be reaching their limit, said Bill Smead, founder and chairman of Smead Capital Management, an investment adviser with more than $7.5 billion in assets under management.
“It’s not unusual for a narrow group of stocks to carry the S&P 500 to higher highs, and that’s what we’ve had,” Smead said in an interview. “But notice even the glam guys are starting to get hit.”
Tesla shares have been hammered off and on over the past few weeks, as annual deliveries fell for the first time and competitors saw stronger demand. Shares of the electric carmaker slumped again on Tuesday. And high-flying Nvidia has wobbled repeatedly over the past month, including on Tuesday in spite of a well-received keynote from Huang.
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“You’re beginning to see the canaries in the coal mine,” Smead said.
Among the various sectors of the S&P 500, only energy notched a gain on Tuesday. Areas that do well in slower economies, like utilities and consumer staples, were down — but so were those that benefit from better activity, like consumer discretionary companies.
U.S. markets will close Thursday as former President Jimmy Carter is laid to rest. And Friday brings the closely watched monthly jobs report from the Labor Department.
This story has been updated with additional information
