Wall Street sinks as hopes fade for rate cuts, trade progress

Wall Street sinks as hopes fade for rate cuts, trade progress

U.S. stock futures were pulled lower by Iran tensions and trade worries on Tuesday, with investors focusing on Federal Reserve officials for more clarity on interest rates.

FILE PHOTO: Traders work on the floor at the NYSE in New York
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2019. REUTERS/Brendan McDermid/File Photo

NEW YORK: Wall Street stock indexes fell on Tuesday, led by a sharp selloff in technology shares, as simmering trade concerns and disappointing economic data sent buyers to the sidelines, while the Federal Reserve chairman pushed back on pressure from President Donald Trump to cut interest rates.

All three major U.S. stock indexes ended the session in the red after Powell said the Fed was grappling with whether trade uncertainties and other issues warrant rate cuts.

Speaking at the Council on Foreign relations, Powell also reiterated the Fed's independence, a day after Trump tweeted the Fed "doesn't know what it's doing."

Earlier, St. Louis Fed President James Bullard in an interview with Bloomberg said he does not think the Fed needs to cut rates by a half-percentage point at its next policy meeting in late July.

Bullard last week said he had dissented at the Fed's June policy meeting because he felt that weak inflation and uncertainties about the economic outlook supported a rate cut.

"Powell and Bullard both made comments that were indicative that we might not see any rate cut in July," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "After last week's meeting, hopes for a rate cut took off and that might not be in the picture next month."

"Likewise, last week there was a higher level of hope that something positive will come out of the G20 meeting," Tuz added. "As the date approaches that optimism is waning a little bit."

Indeed, U.S.-China trade war anxieties found no relief in a White House official's remarks that Trump is "comfortable with any outcome" resulting from a planned meeting with Chinese President Xi Jinping at the Group of 20 summit convening in Japan on Friday.

On the economic front, new home sales and consumer confidence numbers both came in well below economist expectations, according to separate reports from the U.S. Commerce Department and the Conference Board.

The Dow Jones Industrial Average fell 179.32 points, or 0.67per cent, to 26,548.22, the S&P 500 lost 27.97 points, or 0.95per cent, to 2,917.38 and the Nasdaq Composite dropped 120.98 points, or 1.51per cent, to 7,884.72.

Of the 11 major indexes in the S&P 500, ten lost ground, with technology and communications services seeing the biggest percentage drops.

"Weakness in those stocks shows people getting out of the market, out of ETFs," Tuz said.

Rate-sensitive bank stocks were down 0.6per cent, as U.S. Treasuries benchmark yields fell below the closely watched 2per cent level.

AbbVie Inc said it would buy Allergan Plc for about US$63 billion, sending the Botox maker's shares up by 25.4per cent. AbbVie's stock dropped 16.3per cent.

Tyson Foods Inc and Pilgrims Pride Corp dipped 1.1per cent and 1.3per cent, respectively, after the U.S. Department of Justice opened a criminal probe over possible poultry price fixing.

Declining issues outnumbered advancing ones on the NYSE by a 2.01-to-1 ratio; on Nasdaq, a 1.77-to-1 ratio favored decliners.

The S&P 500 posted 30 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 24 new highs and 99 new lows.

Volume on U.S. exchanges was 7.05 billion shares, compared to the 7.02 billion average for the full session over the last 20 trading days.

(Reporting by Stephen Culp; Editing by Chris Reese)

Source: Reuters