The stock market closed lower Tuesday as the technology and financial sectors came under pressure even as investors mostly shrugged off President Donald Trump’s decision to replace Secretary of State Rex Tillerson.
Stocks had rallied earlier after closely watched consumer-inflation data was in line with expectations, helping to placate worries that rising prices would hasten interest-rate hikes by the Federal Reserve.
How did the main benchmarks fare?
The S&P 500 index SPX, -0.08% dropped 17.71 points, or 0.6%, to 2,765.31. Technology and financials were big losers, posting losses of at least 1%.
The Dow Jones Industrial Average DJIA, +0.47% , which earlier was up nearly 200 points, fell 171.58 points, or 0.7%, to 25,007.03. General Electric Co. GE, +0.63% , American Express Co. AXP, -0.15% and Microsoft Corp. MSFT, +0.35% led the losses.
The Nasdaq Composite Index COMP, -0.20% ended a seven-session winning streak to slide 77.31 points, or 1%, to 7,511.01.
What drove the markets?
The consumer-price index rose a mild 0.2% in February after a worrisome 0.5% increase in the first month of the year. The cost of housing rose and the price of clothes and auto insurance posted surprisingly large gains for the second month in a row.
Economists surveyed by MarketWatch had forecast a 0.2% advance. The year-over-year rate for CPI edged up to 2.2% from 2.1% in January.
A stronger-than-expected inflation number was feared as a potential catalyst to nudge the central bank closer to four hikes instead of the three that the Federal Reserve is expected to carry out, something that could weigh on stocks. The Fed is expected to increase interest rates in March, but the jury is out on how aggressively it will act beyond that.
Analysts said Trump’s decision to oust Tillerson had little lasting effect, coming amid a number of personnel moves by the administration. Trump has nominated Central Intelligence Agency Director Mike Pompeo to replace Tillerson.
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What were strategists saying?
“Investors got used to the game of musical chairs in the White House and realize that it’s not a true economic risk,” said Karyn Cavanaugh, senior market strategist at Voya Financial, referring to the Tillerson exit.
“CPI really was on the money, showing inflation is not too hot and not too cold. Combined with the fact that there is still slack in the labor market we don’t worry too much about inflation,” Cavanaugh said.
“Though market sentiment may be periodically impacted by geopolitical uncertainty, including announcements such as the secretary of state change, we will continue to focus on market fundamentals that can drive long-term performance in the economy,” said John Lynch, chief investment strategist for LPL Financial, in a note.
Which stocks were active?
Shares of Qualcomm Inc. QCOM, -0.38% fell 5% after Trump on Monday blocked Broadcom Ltd’s AVGO, +2.75% $117 billion hostile bid for the semiconductor company, citing national security concerns.
DSW Inc. DSW, +1.03% shares rallied 11% after the footwear retailer posted quarterly results.
Stitch Fix Inc. SFIX, -3.95% shares fell 3.6% after the online clothing retailer beat Wall Street’s forecasts for sales, but missed on revenue. In addition, nearly 38 million new shares of the company became eligible for trading after Monday’s close.
Shares of Dick’s Sporting Goods Inc. DKS, +0.72% reversed earlier losses to rise 1% after the sporting goods retailer beat fiscal fourth-quarter profit expectations, but missed on sales and provided a downbeat outlook.
Micron Technology Inc. MU, -1.57% edged up 0.1% after Mizuho raised its price target to $66, the third firm to raise its target this week.
Shares of retailers were sharply higher as they attend the Bank of America Merrill Lynch Consumer & Retail Technology Conference. Macy’s Inc. M, -1.47% gained 3.7%, while Kohl’s Corp. KSS, -1.22% rallied 2.7%.
How did other markets perform?
European stocks SXXP, +0.52% were mostly lower, while Asian markets had a mixed day.
The ICE U.S. Dollar Index DXY, -0.09% fell after the inflation report, while gold pricesGCJ8, -0.05% settled higher and oil prices CLJ8, +0.10% slumped.
The yield on the 10-year U.S. Treasury TMUBMUSD10Y, -0.29% retreated to 2.84% from 2.86% before the report.
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