U.S. stocks fell on Tuesday as the market's recent rally cooled off amid a sharp decline in drug store shares and disappointing economic data.
Shares of pharmacy owner CVS Health and Dow-member Walgreens Boots Alliance dropped after Amazon launched a pharmacy business, which allows free delivery of medications for Prime members. Walgreens shares dropped 9.6% and CVS lost 8.6%. Amazon shares gained 0.2%.
Home Depot added to the decline, falling 2.5% despite a third-quarter earnings beat. Its sales also surged about 24% compared with a year ago as pandemic home improvement buying continued. Walmart dipped as well, closing 2% lower even after posting better-than-expected results for the previous quarter.
Sentiment also took a hit after data showed retail sales increased less than expected in October. Retail sales rose 0.3% last month, versus a 0.5% gain expected by economists polled by Dow Jones.
Tesla shares bucked the market's negative trend, jumping 8.2% after S&P Dow Jones Indices said the electric car maker would join the S&P 500 index, effective Dec. 21. It was a long anticipated move for the surging stock. Before Monday, the shares had already more than quadrupled this year.
Tuesday's moves came after a banner day on Wall Street, with the Dow and S&P 500 posting record closing highs.
"It's natural for the market to take a breather, and the slightly disappointing read on the retail sales front is facilitating that," said Chris Larkin, managing director of trading and investment product at E-Trade. "Without stimulus checks coming in, there's a bit of uncertainty in this sector in the short term."
On Monday, the Dow and S&P 500 jumped after Moderna released trial data showing its coronavirus vaccine was more than 94% effective, further raising expectations of a sharp economic recovery.
That marked the second positive announcement related to a coronavirus vaccine in a week. Pfizer and BioNTech said Nov. 9 that their Covid-19 vaccine candidate was more than 90% effective among participants in a late-stage trial.
Value stocks led the advance on Monday, building on their strong gains from last week. The iShares Russell 1000 Value ETF (IWD) jumped 1.9%, while its growth counterpart closed higher by just 0.5%. Value names lagged growth on Tuesday, however, as IWD fell 0.4% and the iShares Russell 1000 Growth ETF (IWF) closed 0.2% lower.
"Value and smaller companies typically have more leverage to economic recoveries so a vaccine that would remove the weight of COVID-19 off the economy is a distinct positive," wrote Bill Stone, chief investment officer at Stone Investment Partners. "Time will tell if this reversal in trends proves durable or starts "makin' the tears rain down like a monsoon" for value proponents like the many recent false starts."
The recent outperformance in value stocks comes even as the number of coronavirus cases continues to increase, dampening the country's near-term economic outlook.
A survey conducted by Bank of America found that fund managers gave gotten too optimistic about the prospects of a coronavirus vaccine, leading the bank's top strategists to suggest investors sell the news on those developments.
— CNBC's Yun Li contributed reporting.
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