Stocks close lower for a second straight day, Dow sheds 200 points as market rally cools: Live updates

Stocks closed lower for a second straight day on Tuesday.

The Dow Jones Industrial Average fell by 245.25 points, or 0.72%, to 34,053.87. The S&P 500 slid 0.47% to 4,388.71, while the Nasdaq Composite declined 0.16% to 13,667.29.

— Sarah Min

The Grayscale Bitcoin Trust (GBTC) is up by more than 12% for the second-straight session on Tuesday, as traders seem to be betting that the BlackRock filing for a bitcoin ETF is a positive sign for Grayscale's legal fight with the Securities and Exchange Commission.

GBTC trades over the counter and at a large discount to its net asset value. Grayscale sued the SEC after the regulator blocked its plan to convert the fund into an ETF, which is one way the firm could close that discount.

Read more about the fund and the potential arbitrage trade on CNBC Pro.

— Jesse Pound

While tech stocks have rallied sharply in recent months, trading activity and flows in the Invesco QQQ Trust — which tracks the Nasdaq 100 — does not show a frothy market, according to Strategas ETF Strategist Todd Sohn.

"The Nasdaq 100 (QQQ) is currently trading 24% above its 200-day average, good for a 95th percentile reading historically – that's arguably a short-term extreme, but a simple lookback shows this can be consistent with further upward progress while also accompanying important market lows. Notably, QQQ related flows still aren't showing signs of excess, nor are volumes," Sohn said in a note to clients on Tuesday.

— Jesse Pound

A stimulus injection into the Chinese economy won't be enough to solve longer term headwinds, according to Yale University senior fellow Stephen Roach.

"I think there is a tradeoff here between the cyclical stimulus majors that are going to be taken, and the ongoing longer-term issues that China has with respect to growth," Roach told CNBC's "The Exchange." Meanwhile, China is also contending with an ongoing conflict with the U.S., Roach added, as well as "an aging problem, it's got a productivity problem, and it's being driven more by ideology than markets right now."

Weak sentiment in China has pushed firms including Goldman Sachs, UBS. Bank of America and JPMogran to cut growth estimates for the remainder of 2023. The economic recovery in China has so far been lackluster as the world's second-largest economy recovers from rigid Covid-19 lockdowns.

— Brian Evans

Stocks were off their session lows in the final hour of trading.

The Dow Jones Industrial Average fell 200 points, or 0.59%. Earlier in the session, the index was down as much as 383 points, or 1.12%.

The S&P 500 slid 0.42%, while the Nasdaq Composite declined 0.24%. At one point, they were off by 0.96% and 0.93%, respectively.

— Sarah Min

Investors seeking exposure to banking stocks could find "attractive risk/reward" in Wells Fargo, Citigroup, Goldman Sachs and East West Bancorp, according to Bank of America.

"Wells Fargo-WFC (1.2x TBV) remains our top pick to gain exposure to regional banking themes; we see potential upside to mgmt's net interest income guidance. Citigroup-C (0.6x TBV) de-risking underway, 2H23 buybacks could serve as a positive catalyst. We think both WFC and C could see positive reactions on unchanged SCBs," Bank of America's Ebrahim H. Poonawala wrote on Monday.

"Goldman-GS (1.2x TBV) offers an attractive risk/reward to gain exposure to rebounding capital markets. East West-EWBC (1.3x TBV), best-in-class returns not reflected in stock valuation," Poonawala added.

Wells Fargo is up just 1% in 2023, while Citigroup is higher by 5%. Meanwhile, East West Bancorp is down 19% this year, while Goldman Sachs shares are down by 3%.

— Sarah Min, Michael Bloom

Oppenheimer's John Stoltzfus noted Tuesday kept his S&P 500 price target unchanged at 4,400.

"We remain constructive on equities based on improving fundamentals even as uncertainties on the economic and political landscape remain to be addressed," the firm's chief investment strategist wrote. "We expect the equity markets to remain prone to rotation and rebalancing with opportunities for investors to find 'babies that get thrown out with the bath water' a part of the process of a bull market that appears to have legs to climb the proverbial 'Wall of Worry.'"

— Fred Imbert, Michael Bloom

A stronger-than-expected housing report buoyed homebuilders in the S&P 500 on Tuesday.

PulteGroup, D.R. Horton and Lennar were among the leading outperformers in the broader index, each up more than 1% even as the major averages remained under pressure.

— Sarah Min

Atmus Filtration shares advanced more than 4% in Tuesday's session after a handful of Wall Street firms initiated coverage of the stock at buy or an equivalent rating.

Goldman Sachs, JPMorgan, Bank of America and Wells Fargo were among the firms starting coverage of the stock, which went live last month after its spin-off from Cummins.

Goldman's Jerry Revich called the company a "global industry leader focused on broadening its portfolio" in a note to clients Tuesday. And Bank of America's Andrew Obin said Atmus should be able to build on its strengths as a stand-alone company.

CNBC Pro subscribers can read more here.

— Alex Harring

The Global X U.S. Infrastructure Development ETF (PAVE) is up more than 10% this month, on pace for its best monthly performance this year.

The ETF was last up 10.4% on the month. If the fund holds that performance, it will be the best month since October, when it gained 12.2%.

Herc, H&E Equipment, Terex have lead the ETF up this month with advances greater than 24%. Argan was the only stock in the fund on pace to end the month lower at 0.6% down.

— Alex Harring, Gina Francolla

Check out some of the companies making headlines in midday trading.

Chevron, Exxon Mobil — Energy giants Chevron and Exxon slipped more than 2% each in midday trading. News of uncertainty around oil demand in China pushed the price of Brent and U.S. West Texas Intermediate crude futures lower on Tuesday.

Nike — Shares of the sports apparel company slid nearly 3%. On Monday, UBS said that it expects Nike's guidance for full-year 2024 will fall short of expectations. "We anticipate this type of guide causes the market to revise its NKE earnings expectations lower," analyst Jay Sole wrote. He trimmed his price target to $145 from $155, but maintained a buy rating on shares. The company will post its fiscal fourth-quarter results on June 29.

Atmus Filtration — Shares rose 5.5% after Wall Street firms Goldman Sachs, Bank of America, JPMorgan and Wells Fargo initiated coverage at buy or equivalent ratings. The stock debuted on the public markets last month.

Read the full list here.

— Brian Evans

Evercore ISI analyst Amit Daryanani noted that, while Apple's Vision Pro headset "showcases the outsized innovation within AAPL and their ability to integrate hardware, software and services to offer a cohesive solution to consumers," it faces one big hurdle: its roughly $3,500 price tag.

"We think that given the higher ASP vs. AAPL's other consumer products, the unit ramp for the Vision Pro will be slower, and we are currently modelling Apple to sell approximately 14M units in the first few years," he said in a note Sunday. "This would make this the slowest ramping major Apple product and well below the ~86M units the Watch sold in its first five years post-release."

To be sure, if the product "is able to achieve ~1% penetration of the iPhone install base in 5 years, it can contribute ~$19B to revenue and ~$0.20 to EPS."

— Fred Imbert, Michael Bloom

The U.S.-listed shares of Alibaba dropped 4.9% during midday trading. The move comes after the Chinese e-commerce giant said Eddie Wu, one of the firm's co-founders, will replace CEO Daniel Zhang, who is stepping down to focus on Alibaba's cloud business.

In March, Alibaba said it was splitting its firm into six business groups.

— Sarah Min

Nvidia's stock was swimming upstream on Tuesday, gaining about 1% even as the major indexes slumped.

This would mark the seventh positive session in eight for Nvidia, which is now up nearly 200% for the year. The stock still has a buy or strong buy rating from 41 of 49 analysts who cover the company, according to Refinitiv.

— Jesse Pound

Energy was the biggest laggard in the S&P 500, with the sector falling more than 2%.

Leading decliners included Devon Energy and APA, both of which were down more than 4%. Marathon Oil, Halliburton and EOG Resources declined more than 3% each.

— Sarah Min

Domino's Pizza is positioned to improve sales momentum over the coming quarters, UBS said in a note Monday.

A survey by the Wall Street firm shows respondents' intent to visit the chain's locations above its peer average, with "improving food," "providing good value" and "faster service" as key factors driving those increased visits, analyst Dennis Greiger wrote.

"We think DPZ's undemanding valuation (~22x '24 P/E) is attractive relative to peers, w/ a catalyst path ahead to drive upside over time from: 1) improvement in US sales performance; 2) accelerating global unit growth; and 3) an Investor Day later in '23 to detail plans to strengthen growth," he said.

Shares of Domino's are down about 5% year to date.

— Michelle Fox

History has shown that when the stock market has a big first half of the year, a robust second-half often follows.

Returns have been particularly strong in years, such as 2023, when the S&P 500 posts a better than 10% return for the first six months, according to CFRA. In those cases, returns since 1945 have averaged 9% for the index, with gains coming 82% of the time.

—Jeff Cox

The rally for one major A.I. stock may be reaching its ceiling, at least for the near term, according to Raymond James analyst Brian Gesuale.

"While we remain enthusiastic about Palantir's positioning in AI we are downgrading our rating
to Outperform from Strong Buy, as shares have ascended ~$12 B in market cap and appreciated > 60% since its early May 1Q print and the launch of its AI platform (AIP) and now reflects a material element of our near term bullishness," Gesuale said in a note to clients.

Raymond James did raise its price target for Palantir to $18 per share from $15. The stock closed at $16.30 on Friday.

Palantir shares fell 3.5% during trading on Tuesday.

— Jesse Pound

Baidu is the "best" artificial intelligence play in China, according to Morgan Stanley.

Analyst Gary Yu upgraded shares of the Chinese internet stock to overweight from equal weight and raised his price target by $30 to $190. His new target implies a 30.9% upside from where the stock closed Friday.

"We believe China's AI evolution is at an inflection point, and BIDU is the best play to capture the US$7.4tn AI internet opportunity," Yu said in a note to clients Monday.

CNBC Pro subscribers can read the full story here.

— Alex Harring

U.S. Foods shares rose more than 1% after Morgan Stanley got off the sidelines.

Analyst Brian Harbour upgraded the food distributor service's stock to overweight from equal weight and increased his price target by $8 to $54. His new target implies the stock could rally 29.7% from Friday's close.

"There are some fundamental factors we think will continue to work in USFD's favor and drive the narrative," he said. "And we now underwrite more upside to our base case target."

CNBC Pro subscribers can click here to read more about the call.

— Alex Harring

Stocks opened lower Tuesday to kick off a holiday-shortened week. Markets were closed Monday due to the Juneteenth holiday.

The Dow Jones Industrial Average fell by 180 points, or by 0.53%. The S&P 500 declined 0.35%, while the Nasdaq Composite was lower by 0.16%.

— Sarah Min

Home construction is headed for its best month since January.

The iShares U.S. Home Construction ETF (ITB) is up 10.35% in June, on pace for its best monthly gain since January when the ITB rallied 14.79%.

The leading advancers in the fund include Beacon Roofing, TopBuild and KB Home, which are all higher this month by 17% or more.

— Gina Francolla, Sarah Min

Philip Morris shares advanced 1.8% in premarket trading after Citi turned bullish on the tobacco giant, saying its next-generation products, or NGPs, were underappreciated.

Analyst Simon Hales upgraded the stock to buy from neutral and upped his price target by $8 to $117. His new target implies shares can gain 23.3% in the next year.

"Tobacco has de-rated sharply in recent years as the low-growth outlook for cigarettes and ESG considerations have weighed on stocks," Hales said in a note to clients, using the acronym for the environmental, social and governance. "However, with NGPs contributing meaningfully to industry and PM's performance in particular, we believe investors are at risk of structurally under-valuing this evolving segment."

CNBC Pro subscribers can read the full story here.

— Alex Harring

U.S. housing starts were much stronger than expected in May, according to a Census Bureau report released Tuesday.

The U.S. saw 1.63 million starts in May, with 1.49 million new building permits. Economists surveyed by Dow Jones were expecting 1.39 million housing starts and 1.42 million building permits.

The May housing starts number was 21.7% above the revised April estimate of 1.24 million, and up 5.7% year over year, according to the report.

— Jesse Pound

Check out the companies making the biggest moves in premarket trading:

• Alibaba — U.S.-listed shares fell 2.3% after the China e-commerce giant announced CEO Daniel Zhang was stepping down and will be replaced by Eddie Wu, one of Alibaba's co-founders. The move follows the company's announcement in March it was restructuring its business into six business groups.
• Atmus Filtration Technologies — Shares of the air filtration company rose more than 2% after a slew of analysts initiated coverage with bullish ratings, including JPMorgan. The bank said Atmus trades at a "deep discounted valuation vs. peers, despite >80% of aftermarket mix, while its planned expansion into industrial filtration should bridge the valuation gap vs. direct filtration peers over time."
• Dice Therapeutics — The biopharmaceutical stock soared 37.7% after Eli Lilly said it was acquiring the company for $48 per share, or about $2.4 billion, in cash.

Read the full list here.

— Michelle Fox

Morgan Stanley's Mike Wilson says stocks have overextended themselves after the recent rally.

"[We] believe equity markets are as stretched as they can get with market participants wary of missing a potential new bull market," Wilson wrote to clients on Tuesday.

The S&P 500 is coming off its fifth straight week of gains, while the Nasdaq Composite posted its eighth consecutive winning week on Friday. However, Wilson expects that enthusiasm around artificial intelligence and fiscal support that has recently buoyed stocks will not continue for much longer.

"This combination should support our well below consensus view on earnings driven largely by lower revenue growth as pricing power becomes more elusive for many companies," he wrote.

— Sarah Min

Avis advanced 3.5% before the bell Tuesday after Morgan Stanley said to buy the stock and that there could be a higher floor for the business going forward.

Analyst Adam Jonas upgraded the budget rental car company to overweight from equal rate and hiked his price target to $230 from $182. Jonas' new target implies the stock could rise 12.6% in the next year.

"With the backdrop of normalization in the rental industry, we look for operational execution to preserve what could now be a higher floor for the industry," Jonas said in a note to clients Tuesday.

CNBC Pro subscribers can read more here.

— Alex Harring

After a strong performance last week, Adam Crisafulli of Vital Knowledge thinks the market has entered a "consolidation/digestion period."

The S&P 500 had its biggest one-week gain since March last week, rallying 2.6%. This, according to Crisafulli, brought the market benchmark to "relatively expensive levels, leaving sentiment more vulnerable to a variety of negatives and headwinds that have always been lurking in the shadows."

"Investors shouldn't give up entirely on the SPX, but the upside potential is very limited," he said.

— Michael Bloom, Fred Imbert

U.S. Treasury yields were mixed Tuesday as trading resumed after Monday's Juneteenth holiday. In a week that is light on the data front, investors awaited comments from Federal Reserve officials that could provide fresh details about the outlook for interest rates.

At 3:59 a.m. ET the 10-year Treasury was trading more than one basis point higher at 3.7828%. The 2-year Treasury yield was last down by less than one basis point to 4.7211%.

— Sophie Kiderlin

European stock markets fell in early trade, with the Stoxx 600 index down 0.4%.

Germany's DAX declined 0.53%, with France's CAC 40 down 0.2% and the U.K.'s FTSE 100 0.14% lower.

— Jenni Reid

Hong Kong-listed shares of Chinese tech giant Alibaba Group fell further and traded 1.9% lower after it announced that co-founder Eddie Wu will succeed Daniel Zhang as chief executive of Alibaba Group.

Wu is currently chairman of Taobao and Tmall Group, and current executive vice chairman Joesph Tsai will take Zhang's place as the group's chairman.

Zhang will continue to lead the Alibaba Cloud Intelligence Group as chairman and chief executive after this change, which the company said will take effect Sept. 10.

— Lim Hui Jie, Clement Tan

Japanese trading houses jumped at the open on Tuesday after Berkshire Hathaway raised its stake in five Japanese trading firms to average more than 8.5%.

Mitsui jumped 4.55%, Marubeni gained 3.44%, and Mitsubishi rose by nearly 4% while Itochu and Sumitomo rose nearly 3% each.

Japan's top five trading houses saw renewed momentum thanks to Warren Buffett, bucking the trend as Japanese equities continued to drop a second day.

The firm noted that the aggregate value of these interests surpasses that of Berkshire-held stock in any country outside of the U.S., the firm said.

— Jihye Lee, Elliot Smith, Ruxandra Iordache

China has cut its key one-year and five-year loan prime rates by 10 basis points each, the first cut since August.

The one-year LPR stands at 3.55%, down from 3.65%, while the five-year LPR was reduced to 4.20% from 4.30%. The moves mirror cuts that China made last week to its short-term and medium-term loan rates.

After the announcement, the offshore yuan weakened 0.13% to trade at 7.172 against the greenback.

— Lim Hui Jie

UBS says investors need to digest three crucial points in order to sustain the current market rally.

First, investors need to believe that the Federal Reserve won't raise interest rates beyond the two increases implied by the most recent dot plot, according to UBS chief investment officer Americas Solita Marcelli.

Second, investors need to remain confident that the U.S. will avoid a recession. lastly, Marcelli added, the rise of artificial intelligence stocks needs to prove itself "justified," as a the bulk of AI stocks - Nvidia, Amazon, Meta, Tesla, Alphabet, Apple and Microsoft - make up 80% of the S&P 500's climb so far in 2023.

— Brian Evans

The three major averages hit notable milestones with last week's wins, even though Friday ended on a down beat.

While the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite ended Friday's session in the red, the three indexes were up for the week.

The S&P 500 leapt 2.6% for the week, its strongest weekly performance since March and the fifth positive week in a row — a first since it ended a streak of the same length in November 2021. The tech-heavy Nasdaq gained 3.25% on the week, its best since March and the eighth positive week in a row for the first time since it ended a 10-week streak in March 2019.

The Dow also cruised to a modest weekly win, adding 1.25% and notching its third positive week in a row since April of this year.

—Darla Mercado, Chris Hayes

Stock futures ticked down Monday as investors gear up for a shortened trading week.

Futures tied to the Dow Jones Industrial Average fell 65 points, or 0.2%. S&P 500 futures traded 0.2% lower while Nasdaq 100 futures fell 0.15%.

Last week saw the S&P 500 and the Nasdaq Composite post their best weekly performances since March.

— Brian Evans