Stocks finished lower on Tuesday. Although they remained close to the all-time highs they recorded at the start of the week, major stock indexes snapped multi-day winning streaks.
The S&P 500 closed in the red for the first time in six days, down 0.3%. The Dow finished 0.1%, or 24 points lower, ending a four-day winning streak.
The Nasdaq Composite closed 0.4% lower. It had been in the green for two days in a row before.
All three benchmarks finished at all-time highs on Monday, adding onto six closing records last week. The S&P 500 surpassed its most recent record by just about half a point.
Despite Tuesday’s modest losses, it wouldn’t take much for markets to climb to new record highs on Wednesday. Or stocks could continue their lackluster trade just below the brink of record highs until the Federal Reserve meets at the end of the month.
Expectations for a rate cut remain at 100%, with a 70% chance for a 25 basis point cut.
However, economic data on Tuesday was once again better than expected. Retail sales data for June came in stronger than forecast, growing 0.4% on the month. Industrial production for the same month was flat, but manufacturing and capacity utilization rose.
“Rate cuts? Seriously?” wrote MUFG chief financial economist Chris Rupkey in a research note. “The case for interest rate cuts looks increasingly weak as the economy is turning out to be stronger than expected both from the consumer side and on the part or manufacturers.”
The US dollar and the Treasury yields rose following the economic data. Both assets would weaken if the Fed cut rates. The ICE US Dollar Index was last up 0.5% at 97.371, while the 10-year Treasury bond yielded 2.1148%, according to Refinitiv.
Rate cut expectations also featured in Tuesday morning’s bank earnings. While JPMorgan, Goldman Sachs and Wells Fargo all beat estimates, JPMorgan downgraded its net interest income outlook because rate cuts will affect its business.
When the Fed lowers rates, mortgages and loans also become cheaper, thus affecting banks.
Trade talks haven’t been at the forefront of investors’ minds since the tariff truce between the United States and China at the G20 summit in Japan last month. But on Tuesday President Trump said during cabinet meeting that more tariffs could be imposed on Chinese imports. Stocks dipped into negative territory afterward.
US oil futures settled more than 3% lower at $57.62 a barrel, according to CME, after Secretary of State Mike Pompeo reportedly said during a cabinet meeting that Iran is ready to start talks with the United States. Oil prices dropped in response, as a resolution of the conflict with Iran could lead to further oil supplies on the global market, thereby pushing prices down.