Wall Street took another breather on Tuesday, with the Dow Jones Industrial Average suffering back-to-back losses after notching multiple record highs earlier this month, while investors eyed fresh data on slipping consumer sentiment and awaited a closely watched inflation gauge due out later this week.

How stocks traded

  • The S&P 500
    SPX
    ended up 8.65 points, or 0.2%, at around 5,078.18.

  • The Dow Jones Industrial Average
    DJIA
    dropped 96.82, or 0.3%, to finish at 38,972.41. It was the largest one-day point and percentage decline for the blue-chip index since Feb. 16, according to Dow Jones Market Data.

  • The Nasdaq Composite
    COMP
    advanced 59.05, or 0.4%, to end at 16,035.30, snapping a two-day losing streak.

On Monday, the three major benchmark indexes logged small declines — with the S&P 500 and Dow industrials snapping their three-day winning streak after ending last week at record highs, while Nasdaq flirted with its first record finish in more than two years.

What drove markets

U.S. stocks largely traded sideways on Tuesday, recalibrating after AI chipmaker Nvidia Corp.’s
NVDA,
-0.49%
stunning results sparked a wave of record highs on Wall Street last week. The Dow industrials finished modestly lower, while the S&P 500 and the Nasdaq Composite eked out small gains after wavering between gains and losses earlier in the session.

“It’s more a wait-and-see environment than a risk-on or risk-off environment,” said Art Hogan, chief market strategist at B. Riley Wealth Management, in a phone interview with MarketWatch.

The cautious tone came as investors eye economic data in the coming days that may clarify the timing of Federal Reserve interest-rate cuts. The PCE, or personal-consumption expenditures, price index will be published before the market opens on Thursday, and any notable uptick in the gauge may finally kill off any lingering hopes of a May rate cut.

“Nvidia was your must-see TV last week,” Hogan said. This week, it’s the PCE numbers. But given the hotter-than-expected consumer-price index in January, Hogan said markets have priced in the chance of fewer interest-rate cuts. “It would take a significant upside surprise to adversely affect markets,” Hogan said.

Traders have scaled back their bets on near-term rate cuts significantly since the start of 2024. They now expect the first cut to arrive in June, not March or May, according to the CME FedWatch Tool. The chance of at least a 25-basis-point rate cut by June was seen at 49.7% as of Tuesday afternoon.

Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management Co., said the “sideways trading motion” in stocks over the last few days is a reflection of “not a whole lot of progress being made [in the economy] getting back to that 2% inflation level.”

“With each additional resilient data point for the economy, it just pushes out [the Fed’s rate-cut] timeline a little bit further,” he told MarketWatch via phone on Tuesday.

In other U.S. economic data, consumer confidence fell to 106.7 in February from January’s revised read of 110.9, which was a six-month high. The stumble came after a brightening mood and better numbers in recent looks at sentiment.

The pullback is “probably just a slight bump in the recent upward trend that began in October, and perhaps [the result of] some pickup in interest rates in January, which curbs housing demand,” said Sonu Varghese, global macro strategist at Carson Group. Looking deep into the numbers, Varghese said the data “suggests the labor market remains in a healthy place.”

The housing market also may not be helping the mood of consumers. Home prices in the 20 largest U.S. metro areas reached record highs in December, according to the S&P CoreLogic Case-Shiller home-price index. It’s the 11th straight monthly increase in the index, highlighting a nagging shortage of homes for sale nationally.

Meanwhile, U.S. orders for durable goods dropped by 6.1% in January, a sharper-than-expected decline. Economists polled by the Wall Street Journal were expecting a 5% drop.

Companies in focus

  • Viking Therapeutics Inc.
    VKTX,
    +121.02%
    shares finished more than 121% higher after the company announced positive results in a Phase 2 trial of a weight-loss drug to treat obesity and diabetes. Nearly nine in 10 patients on the treatment achieved at least 10% weight loss, versus 4% on the placebo.

  • Macy’s Inc.
    M,
    +3.37%
    shares ended up 3.4% following an earnings beat and the announcement of a strategy to boost growth that includes closing 150 stores. The new approach “challenges the status quo to create a more modern Macy’s,” chief executive Tony Spring said in a statement.

  • Lowe’s Cos. Inc.
    LOW,
    +1.76%
    shares rose 1.8% after a quarterly report from the home-improvement retailer. The company beat on profit but saw a drop in sales, due to slowing do-it-yourself demand and bad weather in January. Its full-year outlook also disappointed analysts.

Jamie Chisholm contributed.

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