The S&P 500 ended lower on Tuesday, reversing course late in the session after comments about a stalemate in talks over a fiscal stimulus deal.
The benchmark index had been higher for much of the session, coming within striking distance of its closing record high from February, before the onset of the U.S. coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.
U.S. Senate Republican leader Mitch McConnell told Fox News that White House negotiators had not spoken on Tuesday with Democratic leaders in the U.S. Congress on coronavirus aid legislation after talks broke down last week.
The Dow also ended down, and the Nasdaq fell more than 1% and underperformed the other major indexes, as investors continued to rotate out of technology-related market heavyweights and into value shares.
“We’re sitting here close to the all-time highs in the S&P 500, so any potential negative headline like that can cause a hiccup,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.
Canada’s main stock index followed U.S. markets lower on Tuesday, as the materials sector dropped with gold prices.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 108.49 points, or 0.65%, at 16,497.01.
The energy sector lost 0.6% with oil prices falling about 1% on Tuesday after rising earlier in the session as hopes dimmed for a swift stimulus package to relieve the U.S. economy as coronavirus cases increased globally.
Brent crude futures fell 49 cents, or 1.1%, to settle at $44.50 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 33 cents, or 0.8%, to finish at $41.61 a barrel.
Some profit-taking ahead of weekly U.S. oil inventory data weighed on prices. Crude and gasoline inventories were seen declining last week, while distillates probably built, a Reuters poll showed ahead of industry data later on Tuesday, followed by the government’s report on Wednesday.
The financials sector gained 1.5%. The industrials sector rose 0.2%.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 5.9%.
Gold sank as much as 5.3% on Tuesday, facing its worst one-day rout in seven years, as a return of risk appetite following encouraging economic numbers and hopes of new coronavirus relief package boosted the S&P 500 to near record highs.
Other precious metals also took a beating, with silver plunging as much as 13.8% - its biggest daily decline since October 2008. It was down 13.4% to $25.24 per ounce. Platinum dropped 4.7% to $940.08, and palladium slid 4.7% to $2,116.33.
“This feels like a mini crash. We could not overcome the early morning headlines of a Russian potential vaccine, and there was just continued optimism flowing into stocks,” said Edward Moya, senior market analyst at broker OANDA.
Spot gold tumbled 5.2% to $1,921.50 per ounce, retreating sharply from Friday’s record high of $2,072.50 and was set for its worst day since June 2013.
U.S. gold futures settled down 4.6% at $1,946.30.
South of the border, investors have been hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with U.S. cases surpassing 5 million last week.
Wedbush trader Joel Kulina said concerns about the stalemate in stimulus negotiations added to pressure to sell recently strong performing tech stocks.
“It just feels like an acceleration of the growth unwind that started last Friday. Today marks day three of the unwind out of growth,” Kulina said. “But I’m not seeing panicking.”
Unofficially, the Dow Jones Industrial Average fell 101.13 points, or 0.36%, to 27,690.31, the S&P 500 lost 26.14 points, or 0.78%, to 3,334.33 and the Nasdaq Composite dropped 182.74 points, or 1.67%, to 10,785.62.
On Tuesday, the Russell 1000 value index rose further, while the Russell 1000 growth index fell.
Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second-quarter earnings season have allowed all three of Wall Street’s main indexes to recover.
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