U.S. equities fell again on Tuesday, pushing the stocks down in what was first back-to-back decline since January. Small-cap stocks were hit even harder, down for four straight sessions and in eight of the last ten sessions. The tape was heavy as political risk continues to grow amid partisan rancor in Washington.
In the end, the Dow Jones Industrial Average gave back 0.1%, the S&P 500 lost 0.3%, the Nasdaq Composite dropped 0.3% and the Russell 2000 lost 0.7%. Treasury bonds were weaker, the dollar ended higher, gold moved down the sixth consecutive session and oil fell 0.1%.
Technology stocks led the way with a 0.2% gain, while energy and telecoms were the laggards, down 0.9% and 0.7%, respectively. Motor home and travel trailer maker Thor Industries, Inc. (NYSE:THO) fell 9.9% after reporting a decline in profitability on a mix shift to lower priced units.
Dick’s Sporting Goods Inc (NYSE:DKS) fell 8.6% on a margin miss and weak guidance. Pandora Media Inc (NYSE:P) fell 6.5% after Liberty Media CEO Greg Maffei told investors at a Deutsche Bank conference that the stock was overvalued and thus “it’s unlikely we’re going to buy them.”
On the political front, the GOP released its plans to replace Obamacare while President Trump tweeted again about his plans to bring down drug prices. Wikileaks also released the “Vault 7” information about the CIA’s hacking program, drawing further attention to calls about Russian influence and Trumps wiretapping allegations.
All of this reduces the chances of bipartisan cooperation on measures like tax reform, deregulation and stimulus spending that Wall Street had assumed would boost the economy and profits this year.
Technically, the weakness in stocks follows the weakness that appeared in the “hard” macroeconomic data at the start of the year, the odd rise in the CBOE Volatility Index “fear gauge” three weeks ago, weakness in emerging market stocks over a week ago, weakness in copper last week, and the current breakdown in high-yield bonds (shown above).
Breadth continues to weaken as well, with the percentage of NYSE stocks above their 50-day moving average dropping to levels not seen since early December — despite the fact the Dow is more than 1,000 points higher than where it was back then.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
