Stocks fell Thursday despite better-than-expected earnings from Facebook and Apple and the Federal Reserve's third rate cut of 2019. Investors took a pause and turned their focus to U.S.-China trade negotiations.
The Dow Jones Industrial Average closed 140.46 points lower, or 0.5% at 27,046.23. The S&P 500 slid 0.3% to 3,037.56, pulling back from a record set in the previous session. The Nasdaq Composite fell 0.1% to 8,292.36.
The major averages posted solid gains for October despite Thursday's losses. The Dow and S&P 500 gained 0.3% and 0.5%, respectively, for the month. The Nasdaq ended October up 0.6%.
Bloomberg News reported Thursday, citing unnamed sources, that Chinese officials have been casting doubt over the possibility of a long-term trade deal with the U.S. The report added Chinese officials are concerned about President Donald Trump's "impulsive nature" and the risk of him backing out of any kind of deal.
"Whenever you see a lowering of trade-deal expectations, it's going to upset markets," said Jeff Kilburg, CEO of KKM Financial. "Here we are at new all-time highs, so the sensitivity to any type of headwind in the U.S.-China trade tariff negotiations is going to be an overreaction."
Trade bellwether Caterpillar dropped 1.8% while Micron Technology slid 0.9%.
Investors had been feeling optimistic about U.S.-China trade recently as both sides pointed to progress on a "phase one" accord being signed in November. China and the U.S. have been in a trade war since last year, slapping tariffs on billions of dollars worth of their goods.
Trump tried to assuage concerns before Thursday's open, saying in a tweet: "China and the USA are working on selecting a new site for signing of Phase One of Trade Agreement, about 60% of total deal, after APEC in Chile was canceled do to unrelated circumstances. The new location will be announced soon. President Xi and President Trump will do signing!"
The major indexes also fell after the Chicago Business Barometer dropped to 43.2 in October. That mark's the barometer's lowest reading since 2015 and its second straight monthly decline. A reading below 50 indicates contraction.
Stocks came into Thursday's session following a banner day after the Federal Reserve cut interest rates by 25 basis points for the third time this year. Comments from Chairman Jerome Powell indicated that the central bank would be hitting pause on monetary policy easing for now, but there will be no hiking until inflation rises "significantly."
"This is appropriate strategy and despite the 'pause' has created a runway for risk assets to continue to rally into [year-end]," said Tom Lee, founder and head of research at Fundstrat Global Advisors. "The Fed has done a much better job in 2019 of understanding the market's risks. Last year the Fed committed one of the largest policy errors in history raising in December."
Treasury yields fell across the board a day after the Fed's announcement, pressuring bank stocks. The benchmark 10-year yield dropped around 11 basis points to 1.68%. Bank of America and Citigroup each dropped at least 1.1%. J.P. Morgan Chase pulled back 0.6%. The SPDR S&P Regional Banking ETF (KRE) dropped 1.5%.
"The risks are still to the downside, especially now that the Fed is on hold," said Crit Thomas, global market strategist at Touchstone Investments. "The market doesn't have much to hang its hat on."
Concerns around trade and the economy on Thursday dampened the enthusiasm around strong earnings from Apple and Facebook.
Apple shares rose 2.3% after the tech giant posted earnings per share of $3.03 on revenue of $64 billion. Analysts polled by Refinitiv expected a profit of $2.84 per share on sales of $62.99 billion. The company's iPhone and services revenues also topped estimates.
Facebook, meanwhile, climbed 1.8% after the social-media company reported a profit of $2.12 per share, topping a Refinitiv estimate of $1.91 per share. Facebook also reported stronger-than-expected average revenue per user.
So far, two thirds of the S&P 500 have reported quarterly numbers. Of those companies, 75% posted better-than-expected results, FactSet data shows.
In other corporate news, Italian-American automaker Fiat Chrysler (FCA) announced a landmark merger with French rival PSA Peugeot Citroen, which will create the world's fourth-largest car maker.
FCA will pay its shareholders a 5.5 billion euro ($6.1 billion) special dividend and the two companies will join forces through a 50-50 share swap. The new company's shares will be listed in New York, Paris and Milan.
—CNBC's Elliot Smith contributed to this report.