Stocks Close Lower Ahead Of Trump Speech To Congress - U.S. Commentary

(RTTNews) - Stocks moved back to the downside during trading on Tuesday after turning higher over the course of the previous session. With the drop on the day, the Dow and the S&P 500 pulled back off yesterday's record closing highs.

The major averages ended the session in negative territory but off their worst levels of the day. The Dow edged down 25.20 points or 0.1 percent to 20,812.24, the Nasdaq slid 36.46 points or 0.6 percent to 5,825.44 and the S&P 500 fell 6.11 points or 0.3 percent to 2,363.64.

The weakness on Wall Street reflected trepidation ahead of President Donald Trump's highly anticipated speech to a joint session of Congress.

The markets have recently benefited from optimism about pro-business policies under Trump, and traders will be looking additional details on his policies on tax reform, deregulation, and infrastructure spending.

Traders were also reacting to a slew of U.S. economic data, including a report from the Commerce Department showing that the pace of economic growth in the fourth quarter was unrevised.

The report said gross domestic product increased by 1.9 percent in the fourth quarter, unrevised from the previous estimate. Economists had expected the pace of growth to be upwardly revised to 2.1 percent.

The unrevised GDP growth in the fourth quarter is notably slower than the 3.5 percent jump seen in the third quarter.

The Commerce Department said an upward revision to consumer spending was offset by downward revisions to state and local government spending and non-residential fixed investment.

A separate report from the Conference Board showed an unexpected improvement in consumer confidence in the month of February.

The Conference Board said its consumer confidence index climbed to 114.8 in February after falling to a revised 111.6 in January. Economists had expected the index to edge down to 110.9.

With the unexpected rebound, the consumer confidence index rose to its highest level since reaching 116.3 in July of 2001.

MNI Indicators also released a report showing a substantial acceleration in the pace of growth in Chicago-area business activity in the month of February.

Sector News

Brokerage stocks showed a significant move to the downside on the day, dragging the NYSE Arca Broker/Dealer Index down by 1.9 percent. The index fell to its lowest closing level in almost a month.

The weakness in the sector came amid an escalating price war as Fidelity Investments and Charles Schwab (SCHW) lowered retail commissions for U.S. stock and exchange-traded funds trades.

Considerable weakness was also visible among telecom stocks, resulting in a 1.7 percent drop by the NYSE Arca North American Telecom Index.

Frontier Communications (FTR) posted a steep loss, tumbling by 10.9 percent after reporting a wider than expected fourth quarter loss.

Retail stocks also came under pressure on the day, with Target (TGT) leading the way lower after reporting weaker than expected fourth quarter results and providing disappointing guidance.

Internet, semiconductor, and steel stocks also saw notable weakness, while some strength was visible among utilities stocks.

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 inched up by 0.1 percent, while Hong Kong's Hang Seng Index fell by 0.8 percent.

Meanwhile, the major European markets all moved modestly higher on the day. While the French CAC 40 Index rose by 0.3 percent, the U.K.'s FTSE 100 Index and the German DAX Index both edged up by 0.1 percent.

In the bond market, treasuries moved back to the upside following the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.1 basis points to 2.358 percent.

Looking Ahead

Reaction to Trump's speech to Congress is likely to be a key driver for the markets early in the trading session on Wednesday.

Reports on personal income and spending, manufacturing activity, and construction spending are also likely to attract attention.

The Federal Reserve is also due to release its Beige Book, which could shed some additional light on the outlook for interest rates.

Additionally, retailers Best Buy (BBY), Dollar Tree (DLTR), and Lowe's (LOW) are among the companies due to report their quarterly results before the start of trading on Wednesday.