With traders looking ahead to the Federal Reserve’s monetary policy announcement on Wednesday, stocks moved to the downside during trading on Tuesday. The Nasdaq and the S&P 500 pulled back after ending the previous session at new record closing highs.
The major averages all closed in negative territory, although the tech-heavy Nasdaq underperformed its counterparts. While the Nasdaq slid 101.29 points or 0.7 percent to 14,072.86, the Dow fell 94.42 points or 0.3 percent to 34,299.33 and the S&P 500 dipped 8.56 points or 0.2 percent to 4,246.59.
The two-day Fed meeting that began today is not likely to result in any changes to monetary policy, but the central bank could signal that it is beginning to think about scaling back its asset purchases.
The Fed announcement on Wednesday is likely to acknowledge the recent increase in inflation, which was highlighted by today’s Labor Department report showing record annual producer price growth.
The Labor Department said its producer price index for final demand advanced by 0.8 in May after climbing by 0.6 percent in April. Economists had expected another 0.6 percent increase.
Excluding prices for food, energy, and trade services, core producer prices rose by 0.7 in May, matching the increase seen in the previous month. Core prices were expected to rise by 0.5 percent.
Compared to the same month a year ago, producer prices in May were up by 6.6 percent, reflecting the largest increase since 12-month data were first calculated in November 2010.
The annual rate of core producer price growth also accelerated to a record high of 5.3 percent in May from 4.6 percent in April.
Meanwhile, the Commerce Department released a separate report showing retail sales tumbled by more than expected in the month of May, although the steep drop followed a notable upward revision to the previous month’s data.
The report said retail sales plunged by 1.3 percent in May following an upwardly revised 0.9 percent increase in April.
Economists had expected retail sales to slump by 0.8 percent compared to the unchanged reading originally reported for the previous month.
Excluding sales by motor vehicle and parts dealers, retail sales still slid 0.7 percent in May after coming in unchanged in April. Ex-auto sales were expected to inch up by 0.2 percent.
The Fed also released a report showing industrial production increased by more than expected in the month of May after a downwardly revised uptick in the previous month.
The report said industrial production climbed by 0.8 percent in May after inching up by a revised 0.1 percent in April.
Economists had expected industrial production to rise by 0.6 percent compared to the 0.5 percent increase that had been reported for the previous month.
Gold stocks showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 1.3 percent to its lowest closing level in a month.
The weakness among gold stocks came amid a continued decrease by the price of the precious metal, with gold for August delivery sliding $9.50 to $1,856.40 an ounce.
Notable weakness was also visible among biotechnology stocks, as reflected by the 1.2 percent drop by the NYSE Arca Biotechnology Index.
Sage Therapeutics (SAGE) posted a steep loss as investors were disappointed by the results of a Phase 3 study of the major depressive disorder treatment the biopharmaceutical company is developing with Biogen (BIIB).
Networking, commercial real estate and software stocks also moved to the downside on the day, while energy stocks sharply higher along with the price of crude oil.
With crude for July delivery jumping $1.24 to $72.12 a barrel, the Philadelphia Oil Service Index spiked by 3 percent and the NYSE Arca Oil Index surged up by 1.8 percent.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index jumped by 1 percent, while China’s Shanghai Composite Index slid by 0.9 percent.
Meanwhile, the major European markets have all moved to the upside on the day. The U.K.’s FTSE 100 Index, the German DAX Index and the French CAC 40 Index all finished the session up by 0.4 percent.
In the bond market, treasuries are showing a lack of direction after coming under pressure on Monday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is unchanged at 1.501 percent.
Trading activity may remain subdued on Wednesday in the lead up to the afternoon release of the Fed’s monetary policy announcement as well as the central bank’s latest economic projections.
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