Dow Pulls Back Sharply On Disappointing Home Depot Results, Debt Ceiling Worries

Stocks moved mostly lower over the course of the trading day on Tuesday, giving back ground after ending Monday’s session mostly higher. The major averages all moved to the downside, with the Dow showing a particularly steep drop.

The Dow and the S&P 500 fell to new lows for the session going into the close of trading. The Dow slumped 336.46 points or 1.0 percent to 33,012.14, the S&P 500 slid 26.38 points or 0.6 percent to 4,109.90 and the Nasdaq dipped 22.16 points or 0.2 percent to 12,343.05.

The steep drop by the Dow was partly due to a decrease by shares of Home Depot (HD), with the home improvement retailer falling by 2.2 percent.

Home Depot moved to the downside after the company reported weaker than expected first quarter revenues and lowered its full-year guidance.

Notable declines by Dow components Nike (NKE), 3M Co. (MMM) and Amgen (AMGN) also weighed on the blue chip index.

Ongoing concerns about the U.S. debt ceiling also generated some negative sentiment as President Joe Biden meets with top congressional leaders.

While Biden has called for a “clean” bill to raise the debt ceiling, Republicans are pushing for spending cuts as well as increased work requirements for social safety net programs.

Meanwhile, traders were also reacting to a mixed batch of U.S. economic data, including separate reports showing weaker than expected retail sales growth and an unexpected increase in industrial production.

The Commerce Department said retail sales rose by 0.4 percent in April after falling by a revised 0.7 percent in March.

Economists had expected retail sales to climb by 0.7 percent compared to the 1.0 percent slump originally reported for the previous month.

Excluding an increase in sales by motor vehicle and parts dealers, retail sales still rose by 0.4 percent in April after sliding by 0.5 percent in March. The rebound in ex-auto sales matched economist estimates.

A separate report from the Federal Reserve showed industrial production climbed by 0.5 percent in April, while revised data showed production was unchanged in each of the two previous months.

Economists had expected industrial production to come in unchanged compared to the 0.4 percent increase originally reported for the previous month.

Sector News

Gold stocks moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 3.2 percent.

The sell-off by gold stocks comes amid a steep drop by the price of the precious metal, with gold for June delivery tumbling $29.70 to $1,993 an ounce.

Considerable weakness was also visible among energy stocks, which moved lower along with the price of crude oil.

With crude for June delivery slipping $0.25 to $70.86 a barrel, the Philadelphia Oil Service Index and the NYSE Arca Oil Index both slumped by 2.7 percent.

Interest rate-sensitive utilities and commercial real estate stocks also came under pressure amid a continued increase in treasury yields, moving notably lower along with steel, biotechnology and natural gas 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 climbed by 0.7 percent, while China’s Shanghai Composite Index slid by 0.6 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.’s FTSE 100 Index fell by 0.3 percent, the French CAC 40 Index dipped by 0.2 percent and the German DAX Index edged down by 0.1 percent.

In the bond market, treasuries moved lower for the third consecutive session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 3.549 percent.

Looking Ahead

News out of the latest round of debt ceiling negotiations may impact trading on Wednesday, while traders are also likely to keep an eye on a report on new residential construction.

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