Technology and healthcare companies drove U.S. stocks to a lower finish Monday as the market fell for a second straight day following a run of record highs.
The selling came amid growing speculation on Wall Street that an unexpectedly strong pickup in U.S. employment growth last month may keep the Federal Reserve from aggressively cutting its benchmark interest rate. Many investors still expect a cut of a quarter of a percentage point, but fewer are now expecting a half-point reduction.
The market rallied through much of June after the central bank signaled that it’s prepared to lower interest rates to offset slowing global growth and the fallout from U.S. trade conflicts. The benchmark Standard & Poor’s 500 index set new record closing highs three days in a row last week, then stumbled Friday after a report that showed U.S. employers added a robust 224,000 jobs in June stoked uncertainty about the Fed’s next move on interest rates.
“We’re getting an equity market that is taking a breather after five weeks of superb performance,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “And we’re on the eve of the beginning of second-quarter earnings season, so it’s simply an equity market taking a breather between those events.”
The S&P 500 fell 14.46 points, or 0.5%, to 2,975.95 on Monday, down about 0.7% from the all-time high it set Wednesday.
The Dow Jones industrial average fell 115.98 points, or 0.4%, to 26,806.14. The Nasdaq composite fell 63.41 points, or 0.8%, to 8,098.38. The Russell 2000 index of smaller-company stocks declined 14.24 points, or 0.9%, to 1,561.39.
The Fed’s benchmark interest rate currently stands in a range of 2.25% to 2.5%, and the central bank has not cut rates since the Great Recession in 2008. Last year, Fed officials raised the rate four times, in part to stave off the risk of high inflation and in part to try to ensure that they would have room to cut rates if the economy stumbled.
Investors will be listening closely for any hints on the Fed’s interest rate policy Wednesday and Thursday, when Fed chief Jerome Powell delivers the central bank’s semiannual monetary report to Congress.
“Looking to the Fed funds futures markets, you see the potential for one to two more additional rate cuts between now and year-end,” Northey said. “There’s a trajectory of easing that is likely to be forthcoming, that is already reflected in capital markets and not likely to change materially based on the testimony later this week.”
Besides keeping an eye on the Fed and on any developments with the U.S.-China trade talks, investors are looking ahead to the flood of earnings reports that companies are set to begin releasing this month.
Expectations are generally low, and this could be the first time in three years that the companies in the S&P 500 report a back-to-back decline in overall earnings, according to FactSet.
Technology and healthcare stocks led the market’s slide Monday. Apple dropped 2.1%, and Cardinal Health slid 1.5%. Communication services companies also declined broadly. Google parent Alphabet fell 1.4%. TripAdvisor lost 4.3%.
Banks also declined. Bank of New York Mellon slid 3.4%.
Traders shifted money into U.S. government bonds and traditionally less-risky sectors such as household goods makers and real estate. Conagra Brands rose 1.5%. AvalonBay Communities gained 1.1%.
Energy stocks rose along with the price of crude oil. Helmerich & Payne shares gained 1.1%.
MDC Holdings jumped 9.7% after the homebuilder issued preliminary second-quarter results that show orders for new homes jumped 32% from a year earlier. That helped push homebuilders’ stocks broadly higher. Beazer Homes USA rose 1.5%.
Bond prices fell, shedding early gains. That lifted the yield on the 10-year Treasury note to 2.05% from 2.04%. Bond yields fell through much of June as investors’ expectations of a Fed rate cut increased.
Deutsche Bank was among the market’s more notable movers Monday. Its U.S.-traded shares tumbled 6.1% after the struggling German company disclosed plans to cut 18,000 jobs by 2022 as it shrinks its investment banking division. It said the move is part of a sweeping restructuring aimed at restoring consistent profitability and improving returns to its shareholders.
F5 Networks slid 3.8% after an analyst at Goldman Sachs downgraded the stock, saying the provider of cloud computing services for mobile apps faces risks amid weaker short-term business spending and rising competition.
Energy futures closed mostly lower. Benchmark crude oil rose 15 cents to settle at $57.66 a barrel. Brent crude oil, the international standard, fell 12 cents to close at $64.11 a barrel. Wholesale gasoline fell 3 cents to $1.90 a gallon. Heating oil declined 1 cent to $1.90 a gallon. Natural gas rose 2 cents to $2.40 per 1,000 cubic feet.
Gold rose 30 cents to $1,397.00 an ounce. Silver rose 5 cents to $14.97 an ounce. Copper stayed at $2.66 a pound.
The dollar rose to 108.72 yen from 108.58 yen. The euro weakened to $1.1212 from $1.1222.