U.S. stocks declined sharply on Tuesday, a day after the Dow industrials and S&P 500 closed near record highs, as American International Group reported a decline in profit and Twitter fell as insiders got their first opportunity to sell since the company's initial public offering.
"We've had an earnings season that's been better than expectations, but not strong enough to get investors terribly excited about the future, and we may be seeing a little hint of a risk-off trade with nervousness over this Ukrainian story, although it doesn't affect the ability of U.S. companies to make money," said Jerry Webman, chief economist at Oppenheimer Funds.
"Good money can be made in a fairly valued market, but to go higher we're going to need some confirmation on earnings and expected earnings," Webman added.
"The primary reason we're down today is we're at all-time highs. If you don't continue to rally, people just start to take profits," said JJ Kinahan, chief strategist for TD Ameritrade.
Shares of AIG fell a day after the insurer posted a 27 percent drop in quarterly profit. Office Depot surged after the retailer hiked its full-year forecast and said it would close at least 400 stores in the United States over the next two years. Twitter tumbled as nearly 500 million shares of the social media stock from company insiders were poised to hit the market as a lock-up period expires.
"It's one of those occasions where you need to see the pace of growth pick up, and right at this point I don't know where it is coming from. It's hard to be bearish, but it's difficult to be bullish at all-time highs; I'd probably be more inclined to put money on the down side rather than on new highs, at least for the next few weeks," said Andrew Wilkinson, chief market analyst at Interactive Brokers.
"There is a tendency to hit these records and then bounce from them," said Webman.
The U.S. trade deficit shrank in March as exports increased, with the gap narrowing to $40.4 billion from $41.9 billion in February, the Commerce Department reported. After the trade data, JPMorgan took its tracking estimate of real GDP growth in the first quarter down to negative 0.8 percent from negative 0.4 percent.
"Exports in the first quarter were particularly weak, but that's on paper. It doesn't really tell you anything about the underlying health of the economy, as that was when transport was frozen, you couldn't build a house or go to the store. Most of the data points now are telling us the economy is reasonably healthy," said Wilkinson.