By Corrie Driebusch
U.S. stocks fell on Tuesday, pulling back after the S&P 500
index's biggest two-session advance in more than a month.
The decline, which steepened in late afternoon trading, was led
by recent stock-market darlings: technology and small-company
stocks.
On Tuesday afternoon, the Dow Jones Industrial Average declined
156 points, or 0.9%, to 17915 and the S&P 500 fell 25 points,
or 1.2%, to 2089.
The Nasdaq Composite, which has been a market leader in recent
months, lost 76 points, or 1.5%, to 4941. Similarly, the small-cap
benchmark Russell 2000 index, which had also been outpacing the
broader market, fell 1.6%.
The retreat in equities was to be expected, traders said. Stocks
have continued to trade in a narrow range, keeping a lid on gains
for the year. The S&P 500 has risen 1.4% over the last two
sessions, its largest two-day gain since March 30, and within
striking distance of its record close. But it has added just 2.7%
in 2015 through Monday's close, while the Dow is up 1.4%.
"Investors are a bit skittish right now," said Kate Warne,
investment strategist at Edward Jones. "While the trend is still
higher and underlying fundamentals support a rising market, unlike
the last 3 1/2 years where we've seen equities rise to a series of
new highs, now we're seeing many more 100 point days up and
down."
She added that investors are overall still putting money into
U.S. stocks, and "they're not really excited about the
process."
Traders struggled to find a single reason for the day's
declines, instead pointing to a host of factors, including weakness
in Europe amid continuing concerns about Greece's standoff with its
creditors, steep stock declines in China and uncertainty heading
into Friday's U.S. jobs report.
Contributing to the pause in equities is uncertainty about when
the Federal Reserve may start to raise short-term interest rates.
Investors are waiting for more data coming out of a slow winter
quarter. If data suggest there has been a pickup in the U.S.
economy, it may open the door for an earlier Fed rate increase.
"Everyone's going to be looking at that jobs and unemployment
number later in the week," said Jonathan Corpina, senior managing
partner at brokerage firm Meridian Equity Partners. "People don't
know exactly what to do at this point. They don't know whether to
be long or short this market, so they're pulling away."
In data Tuesday, the Institute for Supply Management's
nonmanufacturing purchasing managers index came in at 57.8 in
April, up from 56.5 in March. The number was above forecasts, which
had called for a slight slowdown. The unexpected rise in the index
adds weight to the theory that the first-quarter slowdown in the
U.S. economy was a blip, traders said.
After the data was released, Treasury prices tumbled to session
lows, lifting the yield on the 10-year Treasury note to 2.20%, the
highest since March 10, and stocks pared losses slightly. In recent
trading, the yield on the 10-year Treasury note climbed to 2.182%,
from 2.135% Monday.
Data showing a widening trade deficit weighed on stocks Tuesday.
The March expansion in the U.S. trade gap was the largest in nearly
two decades, suggesting international commerce was a significant
drag on economic growth at the beginning of the year. The gap was
driven by the largest increase in imports on record, coinciding
with a late-February agreement resolving the labor dispute at West
Coast ports.
European stocks fell sharply, with Germany's DAX declining 2.5%
and France's CAC 40 down 2.1%.
The Shanghai Composite Index posted its biggest daily percentage
loss since Jan. 19. The index on Monday closed at its
second-highest level of the year. Worries about another crackdown
on margin financing exacerbated concerns about the slowing Chinese
economy, helping drag Shanghai shares lower.
In corporate news, Walt Disney Co. reported a
better-than-expected 7% increase in revenue at the start of the
year. Shares rose 0.2%.
Kellogg Co.'s first-quarter earnings fell 44% as the cereal
maker's performance was hit by the effects from a stronger U.S.
dollar, expenses related to its turnaround effort and
mark-to-market losses for pension plans and commodity contracts.
Kellogg's stock slipped 1.8%.
Shares of Vornado Realty Trust fell 3% after higher rental
revenue and the spinoff of its shopping centers drove the company's
profit and revenue growth in the first quarter.
In other markets, gold futures rose 0.5% to $1192.50 an ounce.
Crude-oil futures gained 2.7% to $60.50 a barrel, rising above $60
for the first time since December.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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