Stocks fall, weighed down by economic data and Fed chief’s remarks

Technology and internet companies led a broad slide for U.S. stocks Tuesday as cautionary remarks from the head of the Federal Reserve and discouraging economic data weighed on the market.

The sell-off marked the third straight loss for the market and the biggest drop this month for the Dow Jones industrial average as well as for the benchmark Standard & Poor’s 500 index, which reached a new high last week.

In his Tuesday speech, Fed Chairman Jerome H. Powell noted that the economic outlook has become cloudier since early May amid uncertainty over trade and global growth. Earlier in the day, reports showed a decline in consumer confidence and more weakness in the housing market.

Powell said the Fed is reassessing its interest rate policy, though he did not commit to a rate cut. Separate comments from James Bullard, president of the Fed’s St. Louis regional bank, may have put a damper on the market’s expectations for big rate cut.

In an interview with Bloomberg Television, Bullard said a half-point rate cut — which many investors have been expecting — would be “overdone,” adding that a quarter-point cut would suffice to shield the economy from a slowdown.

“The risk is to the downside if they don’t cut [rates] when the markets are fully expecting it,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

The S&P 500 index fell 27.97 points, or 1%, to 2,917.38. The Dow fell 179.32 points, or 0.7%, to 26,548.22. The Nasdaq composite, which is heavily weighted with technology stocks, slid 120.98 points, or 1.5%, to 7,884.72.

The Russell 2000 index of smaller company stocks fell 9.05 points, or 0.6%, to 1,521.04.

The market is coming off its third straight weekly gain. The S&P 500 is about 1.3% below the record high it set Thursday.

Prior statements from Fed officials have raised investors’ expectations that the central bank will cut rates as early as next month in response to a slowing global economy. That expectation sparked a rally in the first three weeks of June that wiped out the market’s losses from a steep sell-off in May.

But traders have grown cautious this week. Trade policy remains the biggest source of uncertainty looming over the market. Investors are worried about the U.S.-China trade war and its potential effect on global economic growth and corporate profits.

President Trump and his Chinese counterpart, Xi Jinping, are supposed to meet this week in Japan at the Group of 20 meeting of major economies. The world’s two largest economies spent much of this quarter escalating their trade war and giving Wall Street jitters over prospects for economic growth.

“You could almost tie every piece of weakening economic data, whether it’s domestic or global, back either directly or indirectly to this trade issue,” Frederick said. “What the whole global economy needs is some certainty on trade, but what we’re doing is we’re trying to treat it by cutting interest rates.”

Investors are also looking ahead to next month, when many investors expect the Fed to cut rates.

On Tuesday, Powell reiterated that the central bank is ready to “act as appropriate” to keep the economy growing, though the remarks didn’t give the market a boost.

“The expectations pretty quickly over the last few months went from looking at probably another rate hike to expecting actually a cut,” said Craig Birk, chief investment officer at Personal Capital. “Powell and the Fed are trying to communicate that they do want to remain data-driven and that nothing’s certain yet.”

Fed actions aside, traders remain concerned that corporate profits might suffer if there is the kind of economic slowdown that would prompt the Fed to cut rates.

On Tuesday, the Conference Board said U.S. consumer confidence dropped to its lowest level in more than 18 months. Two other reports showed that home price gains slowed for the 13th straight month in April and that sales of new U.S. homes slumped in May.

Homebuilders’ stocks fell broadly as investors weighed the latest housing data. Lennar led the pack downward, sliding 6.2%, after the builder said a conference call with analysts that tariffs on Chinese goods were adding an average of $500 to the cost of each new home.

Among other homebuilders, PulteGroup fell 2.4% and D.R. Horton fell 3.9%.

Technology and internet stocks led the losses Tuesday. Microsoft fell 3.2% and Facebook fell 2%. FedEx dropped 3.1%, weighing down industrial stocks.

Bond prices rose, sending yields down, as investors shifted money into U.S. bonds as a hedge against a possible downturn in the economy or further escalation in trade tensions. The yield on the 10-year Treasury note fell to 1.99% from 2.02%.

Banks and other financial stocks declined as yields fell, since lower bond yields hurt banks’ ability to charge higher interest on loans. Citigroup shares slid 1.3%.

Botox maker Allergan surged, helping stem the losses in healthcare stocks. The company vaulted 25.4% on news that it is being bought by drug developer AbbVie for about $63 billion. AbbVie slumped 16.3%.

Energy futures closed mostly higher. Benchmark crude oil fell 7 cents to settle at $57.83 a barrel. Brent crude oil, the international standard, rose 19 cents to close at $65.05 a barrel. Wholesale gasoline rose 2 cents to $1.87 a gallon. Heating oil climbed 1 cent to $1.92 a gallon. Natural gas rose 1 cent to $2.31 per 1,000 cubic feet.

Gold rose 60 cents to $1,414.90 an ounce. Silver rose 92 cents to $15.29 an ounce. Copper rose 3 cents to $2.74 a pound.