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U.S. Stocks Give Back Ground After Recent Rebound

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Stocks fluctuated over the course of morning trading on Tuesday before coming under pressure in the afternoon. The major averages slid more firmly into negative territory, partly offsetting the strong upward move seen over the two previous sessions.

The major averages accelerated to the downside going into the close, ending the session at their worst levels of the day. The Dow slid 173.35 points or 0.7 percent to 25,962.44, the Nasdaq fell 54.25 points or 0.7 percent to 7,948.56 and the S&P 500 slumped 23.14 points or 0.8 percent to 2,900.51.

The weakness on Wall Street came amid a pullback by bond yields, which moved back to the downside following the rebound seen on Monday and Friday.

Traders also expressed some uncertainty ahead of the release of the minutes of the Federal Reserve's late-July meeting on Wednesday.

The minutes, along with Fed Chairman Jerome Powell's speech on Friday, may shed additional light on the outlook for interest rates.

The Fed cut interest rates by 25 basis points last month and CME Group's FedWatch tool currently indicates a 95 percent chance of another 25 basis point rate cut in September.

Powell suggested that the July rate cut should not be seen as "the beginning of a lengthy cutting cycle," but President Donald Trump has been putting intense pressure on the Fed to continue cutting rates.

Trump claimed in a post on Twitter on Monday that the U.S. economy is very strong in spite of Powell's "horrendous lack of vision."

"The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well," Trump tweeted.

He added, "If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!"

Negative sentiment was also generated by comments from Trump once again threatening to impose tariffs on European auto imports.

Sector News

Banking stocks showed a significant move to the downside over the course of the trading session, dragging the KBW Bank Index down by 1.7 percent. The index pulled back after moving sharply higher over the two previous sessions.

Considerable weakness was also visible among chemical stocks, as reflected by the 1.4 percent loss posted by the S&P Chemical Sector Index.

Biotechnology, natural gas and oil service stocks also saw notable weakness, moving lower along with most of the other major sectors.

On the other hand, gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 3 percent.

The rally by gold stocks came amid an increase by the price of the precious metal, with gold for December delivery rising $4.10 to $1,515.70 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index climbed by 0.6 percent, while China's Shanghai Composite Index edged down by 0.1 percent.

Meanwhile, the major European markets all moved to the downside. While the U.K.'s FTSE 100 Index slumped by 0.9 percent, the German DAX Index and the French CAC 40 Index fell by 0.6 percent and 0.5 percent, respectively.

In the bond market, treasuries rebounded following the pullback seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 3.7 basis points to 1.561 percent.

Looking Ahead

The minutes of the latest Fed meeting are likely to be in focus on Wednesday, as traders look for clues about the likelihood of further interest rate cuts.

Following two quiet days on the U.S. economic front, traders are also likely to keep an eye on a report on existing home sales in July.

Retail giants Target (TGT) and Lowe's (LOW) are also among the companies due to release their quarterly results before the start of trading on Wednesday.

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