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U.S. Stocks Fall Sharply In Reaction To Disappointing Data, Powell Comments

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After moving modestly lower early in the session, stocks saw further downside over the course of the trading day on Tuesday. The S&P 500 closed lower for the third straight session after ending last Thursday's trading at a record closing high.

The major averages finished the session just off their worst levels of the day. The Dow slid 179.32 points or 0.7 percent to 26,548.22, the Nasdaq plunged 120.98 points or 1.5 percent to 7,884.72 and the S&P 500 tumbled 27.97 points or 1 percent to 2,917.38.

The weakness on Wall Street partly reflected a negative reaction to a Conference Board report showing a substantial deterioration in U.S. consumer confidence in the month of June.

The Conference Board said its consumer confidence index tumbled to 121.5 in June from a downwardly revised 131.3 in May. Economists had expected the index to dip to 132.0 from the 134.1 originally reported for the previous month.

With the much steeper than expected drop, the consumer confidence index slumped to its lowest level since hitting 120.6 in September of 2017.

"The escalation in trade and tariff tensions earlier this month appears to have shaken consumers' confidence," said Lynn Franco, Senior Director of Economic Indicators at the Conference Board.

She added, "Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers' confidence in the expansion."

A separate report from the Commerce Department also unexpectedly showed a steep drop in new home sales in the U.S. in the month of May.

The Commerce Department said new home sales plunged by 7.8 percent to an annual rate of 626,000 in May after tumbling by 3.7 percent to a revised rate of 679,000 in April.

Economists had expected new home sales to climb by 1 percent to a rate of 680,000 from the 673,000 originally reported for the previous month.

Additional selling pressure was generated in reaction to comments from Federal Reserve Chairman Jerome Powell, who reiterated the Fed will "act as appropriate" to sustain the economic expansion but did not appear to signal the imminent interest rate cut currently being priced in by the markets.

"Many FOMC participants judge that the case for somewhat more accommodative policy has strengthened," Powell said during a speech before the Council on Foreign Relations in New York.

He added, "But we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment."

Sector News

Software stocks moved sharply lower over the course of the trading session, dragging the Dow Jones U.S. Software Index down by 2.7 percent. The index continued to give back ground after reaching a record high last Thursday.

Industry giant Microsoft (MSFT) helped to lead the software sector lower, tumbling by 3.2 percent after ending the previous session at a record closing high.

The disappointing new home sales data also contributed to considerable weakness among housing stocks, as reflected by the 1.6 percent slump by the Philadelphia Housing Sector Index.

Natural gas, gold, and semiconductor stocks also saw significant weakness on the day, while tobacco stocks showed a substantial move to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index fell by 0.4 percent while Hong Kong's Hang Seng Index slumped by 1.2 percent.

Meanwhile, the major European markets turned in another mixed performance on the day. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index edged down by 0.1 percent and the German DAX Index fell by 0.4 percent.

In the bond market, treasuries extended the upward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 1.994 percent, closing below 2 percent for the first time since November of 2016.

Looking Ahead

A report on durable goods orders is likely to attract some attention on Wednesday, although traders may continue to look ahead to the G20 summit later this week.

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