Dow, S&P 500 retreat as yields edge up ahead of data, earnings

US stock market: The Dow Jones Industrial Average (.DJI) fell 157.85 points, or 0.42 per cent, to 37,525.16. The S&P 500 (.SPX) lost 7.04 points, or 0.15 per cent, at 4,756.50 and the Nasdaq Composite (.IXIC) gained 13.94 points, or 0.09 per cent, at 14,857.71.

US stock market: The S&P 500 and Dow lost ground and closed lower on Tuesday. Image: Reuters

US stock market: The S&P 500 and Dow lost ground and closed lower on Tuesday, pressured by a modest rise in Treasury yields as investors assessed the timing and size of any Federal Reserve interest rate cuts in 2024 ahead of inflation data this week.

Expectations the central bank could begin cutting rates as soon as March have been slowly decreasing, with CME's FedWatch Tool showing a 65.7 per cent chance for a cut of at least 25 basis points (bps) for the month, down from 79 per cent a week ago.

That has helped keep US Treasury yields hovering near the 4 per cent mark, with the benchmark 10-year yield last up slightly at 4.019 per cent after reaching a high of 4.053 per cent earlier in the session.

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Investors are bracing this week for more Treasury supply and the consumer price index (CPI) and producer price index (PPI). Earnings season unofficially begins on Friday, with reports from banks such as JPMorgan (JPM.N).

"It's all speculation on what the Fed may or may not do and the bond market clearly got ahead of itself in anticipating rate cuts starting in March," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

"The fed futures will move around based on earnings definitely and on the data. ... The market is just jumping one way or the other trying to get ahead of things if they occur."

The Dow Jones Industrial Average (.DJI) fell 157.85 points, or 0.42 per cent, to 37,525.16. The S&P 500 (.SPX) lost 7.04 points, or 0.15 per cent, at 4,756.50 and the Nasdaq Composite (.IXIC) gained 13.94 points, or 0.09 per cent, at 14,857.71.

A late move higher helped push the Nasdaq back into positive territory for the day.

The majority of the 11 major S&P sectors fell, with energy (.SPNY) the weakest with a decline of 1.63 per cent while tech (.SPLRCT) led the four sector gainers with a rise of only 0.25 per cent.

Stocks had rallied on Monday, with the Nasdaq and S&P 500 scoring their first daily percentage climbs of more than 1 per cent since Dec. 21 and biggest one-day percentage advances since Nov. 14.

Atlanta Fed President Raphael Bostic on Monday stressed the need to keep monetary policy tight, while Fed Governor Michelle Bowman retreated from her persistently hawkish view and signaled a willingness to support eventual rate cuts as inflation eases.

Investors will parse Fed Vice Chair for Supervision Michael Barr's remarks for his perspectives on the policy outlook later on Tuesday.

Boeing (BA.N) weakened for a second straight session to close down 1.41 per cent as the plane maker, main US air regulator and US airlines were still wrangling over 737 MAX 9 inspection guidelines that would address safety lapses after airlines found several aircraft with loose parts. The parts were found on grounded 737 MAX 9s in the wake of last week's emergency landing of an Alaska Airlines flight after a panel blew off.

Juniper Networks (JNPR.N) surged 21.81 per cent after a source told Reuters that Hewlett Packard Enterprise (HPE.N) was in talks to buy the networking product maker in a $13-billion deal. The server maker dropped 7.3 per cent.

Declining issues outnumbered advancers by a 2.1-to-1 ratio on the NYSE while on the Nasdaq, declining issues outnumbered advancers by a 1.7-to-1 ratio.

The S&P 500 posted 12 new 52-week highs and no new lows while the Nasdaq recorded 90 new highs and 87 new lows.

Volume on US exchanges was 10.56 billion shares, compared with the 12.3 billion average for the full session over the last 20 trading days.

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