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Stocks fall, dragged down by industrials and retailers

Signs for the New York Stock Exchange hang above the trading floor.
Signs for the New York Stock Exchange hang above the trading floor.
(Mark Lennihan / Associated Press)

U.S. stock indexes finished the day down Tuesday as industrial companies and retailers fell. Smaller and more U.S.-focused companies slumped after setting records the last few days.

Large industrial companies such as Boeing, 3M and Caterpillar slipped. Retailers including Kohl’s, AutoZone and Advance Auto Parts fell after releasing their quarterly results. Smaller companies had their worst day of the month as a winning streak that brought them to all-time highs came to an end.

For most of the day, stocks were on track for small gains. Automakers rose after China said it will reduce duties on imported cars in July, a sign the United States and China could resolve some of their differences on trade. Banks climbed as Congress prepared to loosen some of the rules that have governed the industry since the 2008 financial crisis.

On Monday, stocks rose as investors grew more hopeful that the trade dispute between the U.S. and China would be resolved without major effects on the global economy. But Marina Severinovsky, an investment strategist at Schroders, said the two countries appear to be looking for easy wins without addressing larger and more difficult issues, such as China’s technology policies and its handling of intellectual property.

That might pacify the market for now because the global economy is doing well, but she thinks tensions eventually will flare up again.

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“The more competitive the Chinese become in higher-end industries, the more this is really going to become an issue,” she said. “There will be more industries and companies clamoring for protection.”

The Standard & Poor’s 500 index fell 8.57 points, or 0.3%, to 2,724.44 on Tuesday. The Dow Jones industrial average slid 178.88 points, or 0.7%, to 24,834.41. The Nasdaq composite slipped 15.58 points, or 0.2%, to 7,378.46. The Russell 2000 index of smaller-company stocks went down 12.20 points, or 0.7%, to 1,625.24 after it closed at record highs the previous four trading days.

J.C. Penney was one of the worst performers among both small companies and retailers. It fell 6% to $2.35 after it said Chairman and Chief Executive Marvin Ellison will leave to become CEO of Lowe’s. He worked at Lowe’s rival Home Depot for 12 years before he was hired by J.C. Penney, which reported weak first-quarter results less than a week ago.

Jeans retailer Guess fell 7.9% to $23.80.

Kohl’s had a strong second quarter, but it said it got much of that strength because a Mother’s Day-related sale came earlier in the year. Although that helped the company in the fiscal second quarter, it will hurt its sales in the third and fourth quarters. Kohl’s sank 7.4% to $60.61.

Banks fared better as the House of Representatives was expected to pass a bill that raises the threshold at which banks are deemed so big and so connected to the financial grid that if one were to fail it would cause major havoc. The legislation would roll back parts of the Dodd-Frank law, which was passed in the aftermath of the 2008 financial crisis. The measure passed the Senate in March with the support of Republicans and some Democrats.

Banks reported record earnings for last quarter as last year’s corporate tax cut juiced their profits. BB&T Corp. shares rose 1.3% to $55.53. Bank of America rose 1.1% to $30.89.

Severinovsky, of Schroders, said the bill wouldn’t make a major difference to banks, but it gave investors a reason to feel better about their prospects.

“These are very different businesses than the way we remember them in 2009,” she said, adding that banks have stronger balance sheets and are benefiting from the improved economy and higher interest rates.

China followed up on a promise it made in April by reducing auto-import duties effective July 1. That follows pledges to buy more U.S. goods and end restrictions on foreign ownership in the industry. China is the world’s biggest auto market by number of vehicles sold: Consumers there bought 24.7 million SUVs, sedans and minivans in 2017, compared with 17.2 million in the next-biggest market, the United States.

Tata Motors of India shares rose 4% to $22.91. Fiat Chrysler advanced 1.3% to $22.62.

Tesla faltered 3.3% to $275.01 after Consumer Reports said the company’s Model 3 sedan has unusually long emergency stopping distances.

Micron Technology jumped 6.4% to $59.03 after the chipmaker said it will buy back $10 billion in stock.

Benchmark U.S. crude shed an early gain and ended down 0.2% at $72.13 a barrel in New York. Brent crude, used to price international oils, rose 0.4% to $79.57 a barrel in London.

Wholesale gasoline rose 0.6% to $2.27 a gallon. Heating oil rose 0.3% to $2.28 a gallon. Natural gas jumped 3.5% to $2.91 per 1,000 cubic feet.

Gold edged up 0.1% to $1,292 an ounce. Silver rose 0.3% to $16.58 an ounce. Copper rose 1.1% to $3.13 a pound.

Bond prices were little changed. The yield on the 10-year Treasury note stayed at 3.06%.

The dollar fell to 111.02 yen from 111.11 yen. The euro rose to $1.1779 from $1.1772.

The German DAX, which was closed for a holiday Monday, jumped 0.7%. London’s FTSE 100 rose 0.2%. France’s CAC 40 edged up less than 0.1%. Tokyo’s Nikkei 225 slipped 0.2%. Markets in Hong Kong and South Korea were closed for holidays.


UPDATES:

2:05 p.m.: This article was updated with closing prices, context and analyst comment.

1:20 p.m.: This article was updated with the close of markets.

This article was originally published at 7:35 a.m.


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