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U.S. Stocks Finish Lackluster Session Modestly Lower

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After inching up to new record closing highs in the previous session, stocks fluctuated over the course of the trading day on Tuesday before closing modestly lower.

The Dow hit a new record intraday high in morning trading but eventually ended the day down 23.53 points or 0.1 percent at 27,335.63.

The tech-heavy Nasdaq also slid 35.39 points or 0.4 percent to 8,222.80, while the S&P 500 fell 10.26 points or 0.3 percent to 3,004.04.

Selling pressure emerged in afternoon trading after President Donald Trump told reporters U.S.-China trade talks still have a "long way to go" and once again threatened to impose tariffs on another $325 billion worth of Chinese goods.

The lower close on Wall Street also came as a mixed batch of U.S. economic data led to uncertainty about the near-term outlook for interest rates.

Raising concerns the Federal Reserve could refrain from cutting rates later this month, the Commerce Department released a report showing much stronger than expected U.S. retail sales growth.

The Commerce Department said retail sales rose by 0.4 percent in June, matching the downwardly revised increase in May. Economists had expected retail sales to inch up by 0.1 percent.

Closely watched core retail sales, which exclude autos, gasoline, building materials and food services, jumped by 0.7 percent in June after climbing by an upwardly revised 0.6 percent in May.

ING Chief International Economist James Knightley said the report suggests consumer spending rose robustly in the second quarter, which he expects to help keep GDP growth above 2 percent.

"Despite this, financial markets continue to price in four 25 basis point interest rate cuts from the Federal Reserve over the next 18 months," Knightley said.

He added, "Yet, in an environment where growth is solid, core inflation is close to target, unemployment is near 50-year lows and stock markets are at all-time highs, there seems little justification for anything more than precautionary rate cuts."

Meanwhile, a separate report from the Fed showed U.S. industrial production was unexpectedly flat June, as a steep drop in utilities output offset increases in manufacturing and mining output.

The Fed said industrial production was unchanged in June after climbing by 0.4 percent in May. Economists had expected production to edge up by 0.2 percent.

Traders were also digesting earnings news from big-name companies such as Goldman Sachs (GS), Johnson & Johnson (JNJ), JPMorgan (JPM), and Wells Fargo (WFC).

Sector News

Energy stocks came under pressure over the course of the trading session, as the price of crude oil fell sharply after U.S. Secretary of State Mike Pompeo said Iran is prepared to negotiate about its missile program. Crude for August delivery tumbled $1.96 to $57.62 a barrel.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index plunged by 2.1 percent, while the Philadelphia Oil Service Index slumped by 1.4 percent.

Significant weakness was also visible among software stocks, as reflected by the 1.2 percent loss posted by the Dow Jones U.S. Software Index.

Computer hardware and semiconductor stocks also saw considerable weakness on the day, while strength in the transportation sector drove the Dow Jones Transportation Average up by 1.8 percent to a two-month closing high.

J.B. Hunt Transport Services (JBHT) led the transportation sector higher after the trucking company reported better than expected adjusted second quarter earnings on revenues that exceeded estimates.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. Japan's Nikkei 225 Index slid by 0.7 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index rose by 0.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index advanced by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries gave back ground after moving modestly higher over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3 basis points to 2.122 percent.

Looking Ahead

A report on housing starts may attract some attention on Wednesday along with the Fed's Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

On the earnings front, Cintas (CTAS), CSX Corp. (CSX), and United Airlines (UAL) are among the companies releasing their quarterly results after the close today's trading.

Bank of America (BAC), Ericsson (ERIC), and U.S. Bancorp (USB) are also among the companies due to report their results before the start of trading on Wednesday.

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