Key points:

  • The S&P 500 and Dow closed lower on Tuesday.
  • The main reason for the decline was a moderate increase in Treasury yields.
  • Investors are expecting an increase in the supply of Treasuries this week, as well as the consumer price index (CPI) and producer price index (PPI).

The Dow dipped 0.42% to close at 37,525.16, while the S&P 500 shed 0.15% to finish at 4,756.50. The Nasdaq, however, reversed the course and gained again 0.09% to end at 14,857.71.

The broader market was weighed down by a decline in the energy sector, which was dragged down by a 1.63% drop in crude oil prices. The technology sector fared slightly better, with a 0.25% gain, leading the few sectors that managed to post positive results.

Monday had been a positive day for stocks, with the Nasdaq and S&P 500 posting their first daily percentage gains of more than 1% since December 21 and their biggest one-day percentage gains since November 14.

Boeing’s stock price continued to decline, falling by 1.41% for the second consecutive day. The ongoing disagreement between the plane maker, the U.S. aviation regulator, and U.S. airlines over inspection guidelines for the 737 MAX 9, following the emergency landing of an Alaska Airlines flight last week, weighed on the stock’s performance.

Juniper Networks shares surged by an impressive 21.81% after news broke that Hewlett Packard Enterprise is reportedly in discussions to acquire the networking products maker for a staggering $13 billion. Hewlett Packard Enterprise’s stock, on the other hand, took a hit, losing 7.3%.

The S&P 500 index marked 12 new 52-week highs without registering any new lows, while the Nasdaq Composite index recorded a remarkable 90 new highs alongside 87 new lows.

Trading volume on U.S. exchanges amounted to 10.56 billion shares, slightly lower than the 12.3 billion average seen over the past 20 trading days.

Reasons for falling indices

The S&P 500 and Dow Jones Industrial Average retreated on Tuesday, closing lower as a moderate increase in Treasury yields weighed on the markets. Investors were cautiously assessing the timing and extent of any potential interest rate cuts by the Federal Reserve in 2024, with this week’s inflation data casting a shadow over their expectations.

Speculations that the central bank might commence rate reductions as early as March have gradually waned. The FedWatch Tool CME currently indicates a 65.7% probability of a cut of at least 25 basis points in March, down from 79% a week prior.

This moderating stance contributed to U.S. Treasury yields remaining near the 4% level, with the benchmark 10-year yield marginally advancing to 4.019% after peaking at 4.053% earlier in the trading day.

Investors are anticipating an influx of Treasury securities being released into the market this week, and they are also eagerly awaiting the release of key economic data, including the consumer price index (CPI) and the producer price index (PPI). Additionally, the unofficial start of earnings season is set for Friday.

On Monday, Atlanta Fed President Raphael Bostic reiterated the importance of maintaining a tight monetary policy stance, while Fed Chair Michelle Bowman subtly shifted her stance from her traditionally hawkish approach, indicating a willingness to support potential interest rate cuts as inflation subsides.