By Corrie Driebusch And Saumya Vaishampayan
U.S. stocks fell on Tuesday, pulling back after the S&P 500
index notched its biggest two-day advance in more than a month.
The Dow Jones Industrial Average declined 53 points, or 0.3%, to
18017. The S&P 500 fell 12 points, or 0.6%, to 2103 and the
Nasdaq Composite lost 52 points, or 1%, to 4965.
Traders struggled to find a single reason for the day's
declines, instead pointing to a host of factors, including weakness
in Europe on continuing concerns about Greece's standoff with its
creditors, steep stock declines in China, and uncertainty heading
into Friday's U.S. jobs report.
The slight retreat in equities was to be expected, traders said.
Stocks have continued to trade in a narrow range, keeping a lid on
gains for the year. The S&P 500 has risen 1.4% over the last
two sessions, its largest two-day gain since March 30, and within
striking distance of its record close. But it has added just 2.7%
in 2015 through Monday's close, while the Dow is up 1.4%.
"We've had an impressive rally since Thursday," said Jim
Dunigan, chief investment officer at PNC Wealth Management. "A
little breather here isn't surprising."
Traders said contributing to the pause in equities is
uncertainty about when the Federal Reserve may start to raise
short-term interest rates. Investors are waiting for more data
coming out of a slow winter quarter. If data suggests there has
indeed been a pickup in the U.S. economy, it may open the door for
an earlier rate increase by the Fed.
"Everyone's going to be looking at that jobs and unemployment
number later in the week," said Jonathan Corpina, senior managing
partner at brokerage firm Meridian Equity Partners. "People don't
know exactly what to do at this point. They don't know whether to
be long or short this market, so they're pulling away."
Some data came on Tuesday from the Institute for Supply
Management. The ISM's nonmanufacturing purchasing managers index
came in at 57.8 in April, up from 56.5 in March, above forecasts,
which had called for a slight slowdown. The unexpected rise in the
index adds weight to the theory that the first-quarter slowdown in
the U.S. economy was a blip, traders said.
After the data was released Treasury prices tumbled to session
lows, lifting the yield on the 10-year Treasury note to 2.20%, the
highest since March 10, and stocks pared losses slightly. In recent
trading, the yield on the 10-year Treasury note climbed to 2.185%
from 2.135% on Monday.
Data showing a widening trade deficit weighed on stocks Tuesday.
The March expansion in the U.S. trade gap was the largest in nearly
two decades, suggesting international commerce was a significant
drag on economic growth at the beginning of the year. The gap was
driven by the largest increase in imports on record, coinciding
with a late February agreement resolving the labor dispute at West
Coast ports. Imports are a negative for economic growth.
Partially offsetting the declines in equities Tuesday were gains
in shares of energy companies. Crude-oil futures gained 3.2% to
$60.81 a barrel, rising above $60 for the first time since
December.
Shares of energy companies in the S&P 500, which have been
pummeled in the past year as oil prices tumbled, were the biggest
gainers on Tuesday, rising 0.2%, the only positive sector. Chevron
Corp. and Exxon Mobil Corp. were among the best performers in the
Dow.
European stocks fell sharply, with Germany's DAX declining 2.5%
and France's CAC 40 down 2.1%.
The Shanghai Composite Index posted its biggest daily percentage
loss since Jan. 19. The index on Monday closed at its
second-highest level of the year. Worries about another crackdown
on margin financing exacerbated concerns about the slowing Chinese
economy, helping drag Shanghai shares lower.
In corporate news, Walt Disney Co. reported a
better-than-expected 7% increase in revenue at the start of the
year. Shares rose 1.1%.
Kellogg Co.'s first-quarter earnings fell 44% as the cereal
maker's performance was hit by the effects from a stronger U.S.
dollar, expenses related to its turnaround effort and
mark-to-market losses for pension plans and commodity contracts.
Kellogg's stock slipped 1.8%.
In other markets, gold futures rose 0.7% to $1194.90 an
ounce.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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