Technology companies led stocks lower on Wall Street on Tuesday as a wobbly day of trading ended with modest losses for the market.
Healthcare stocks jumped on stronger-than-expected reports from drug makers, but losses for internet and media companies held the market in check after a mixed report from Google parent Alphabet.
Companies have largely been reporting stronger earnings than analysts expected, but they’re nowhere close to blow-away good. S&P 500 companies are still on track to report a third straight quarter of profit declines, according to FactSet.
Tuesday’s modest market pullback came a day after the S&P 500 hit an all-time high. The benchmark index mostly drifted between small gains and losses Tuesday, finishing within 0.1% of its record.
“The market was a little bit overbought,” said Janet Johnston, portfolio manager at TrimTabs Asset Management. ”It’s a good sign that it continues to hold at new highs.”
The S&P 500 slipped 2.53 points, or 0.1%, to 3,036.89. Its Monday record surpassed its prior peak, set in late July.
The Dow Jones Industrial Average dropped 19.26 points, or 0.1%, to 27,071. The Nasdaq composite slid 49.13 points, or 0.6%, to 8,276.85.
Smaller companies fared better than the rest of the market. The Russell 2000 index rose 5.14 points, or 0.3%, to 1,577.07.
Major stock indexes in Europe closed mostly lower. The price of crude oil dropped a second straight day, and gold dipped.
U.S. stocks are on track to end October with gains. The S&P 500 has closed with a weekly gain the past three weeks.
Helping to buoy the market in recent weeks are hopes that the United States and China can make progress on their trade dispute, or at least stop making it worse. Lower interest rates have also played a big role, and on Wednesday the Federal Reserve will wrap up a two-day meeting on rate policy.
Most investors expect the Fed to cut short-term rates by a quarter of a percentage point to offer some protection from the trade war and the slowing global economy. If that happens, it would be the third such cut since the summer.
Treasury yields slipped ahead of the decision. The yield on the 10-year Treasury slid to 1.83% from 1.85% late Monday. The two-year yield, which is more sensitive to moves by the Fed, fell to 1.63% from 1.64%.
Global stock markets were mixed.
Benchmark crude oil fell 27 cents to settle at $55.54 a barrel. Brent crude oil, the international standard, inched up 2 cents to close at $61.59 a barrel.
Gold fell $5.00 to $1,487.40 per ounce. The dollar fell to 108.81 Japanese yen from 109.02 yen on Monday. The euro strengthened to $1.1110 from $1.1098.
Not bad but not great
Nearly half of the companies in the S&P 500 have told investors how much they earned in the July-through-September quarter, and the index is on pace to report a profit drop of 3.5% from the prior year, according to FactSet.
That’s not as bad as the roughly 4% decline that analysts were expecting on the eve of earnings reporting season, but it would be the first time that profits dropped for three straight quarters since 2015-16.
Trade wars and the slowing global economy are hitting companies that do lots of business overseas, and analysts say the sharpest earnings declines will come from energy companies, raw-material producers and technology firms. Wall Street is expecting stronger growth, meanwhile, from companies that do most of their business domestically, such as utilities and real estate companies.
Over the long term, stock prices tend to track the path of corporate profits.
Healthcare stocks had the biggest gains among the 11 sectors that make up the S&P 500 following better-than-expected reports from Pfizer and Merck.
Pfizer shares rose 2.5% after it raised its forecast for the year.
Merck stock gained 3.5% after reporting big jumps in sales for its top two blockbuster drugs, cancer drug Keytruda and vaccine Gardasil.
General Motors climbed 4.3% after reporting quarterly results that were better than Wall Street expected, even though a strike by its employees brought its U.S. factories to a standstill.
Apple, which is due to report quarterly results Wednesday, contributed to the slide in technology stocks Tuesday. The stock lost 2.3%.
Google’s parent company, Alphabet, dropped 2.2% following its mixed earnings report. Revenue came in better than Wall Street’s expectations, but profit fell short.
The Federal Reserve has cut interest rates twice since the summer in hopes of shielding the United States from the effects of President Trump’s trade wars and the slowing global economy.
It’s a sharp turnaround from late last year, when the Fed was raising rates; investors worried then that the central bank was increasing them too much, too fast. Lower rates make borrowing cheaper for companies and households, which can stimulate the economy and also make stocks look more attractive relative to bonds.
Most investors expect a rate cut to come Wednesday, but they’re much less certain what will happen after that.
The only issue more important than interest rates to markets in the short term is the U.S.-China trade war, Jeffrey Halley of Oanda said in a commentary.
The two sides are continuing to talk, but uncertainty is high. China on Tuesday promised more improvements in conditions for foreign companies, which has been a key factor in the trade dispute. But it also separately accused the United States of “economic bullying behavior” after U.S. regulators cited security threats while proposing to slash funding for Chinese equipment in U.S. telecommunications networks.
Britain’s FTSE 100 fell 0.5% as it became clear the country would head to another general election to try to resolve its political impasse over Brexit. Germany’s DAX slipped 0.1%. The CAC 40 in Paris was little changed.
In Asia, Japan’s Nikkei 225 index gained 0.5%. The Hang Seng in Hong Kong lost 0.4%, and the Shanghai Composite index dropped 0.9%.
Hong Kong Chief Executive Carrie Lam said Tuesday the city might fall into recession as it entered its fifth month of protests. Third-quarter data are due out Thursday, and if they show negative growth, then the semiautonomous Chinese territory’s economy will have entered a technical recession.