The S&P 500 fell Tuesday, weighed by concerns over rising Treasury yields ahead of a key speech later this week from Federal Reserve Chairman Jerome Powell, as well as declines in banking and retail shares.
The S&P 500 edged 0.3% lower to 4,387.55, while the Dow Jones Industrial Average slid 174.86 points, or 0.5% to 34,288.83. The tech-heavy Nasdaq Composite eked out a small gain to close at 13,505.87. Nvidia, which is slated to report earnings Wednesday, ended the session down 2.9% — erasing an earlier gain.
Several regional and larger banks fell after S&P Global cut credit ratings and revised its outlook for multiple U.S. banks on Monday, citing "tough" operating conditions. The financial sector ended Tuesday down 0.9%, making it the worst-performing sector of the S&P 500. KeyCorp and Comerica dropped 4.1% each. Big bank JPMorgan Chase also fell 2.1%.
Dick's Sporting Goods and Macy's fell by 24% and 14%, respectively, on cautious full-year forecasts, also leading the SPDR S&P Retail ETF lower. Dow member Nike slid more than 1% for its ninth consecutive daily loss
Wall Street has been focused on the bond market after the benchmark 10-year Treasury yield hit its highest level since 2007 this week. The 10-year yield eased slightly Tuesday to 4.33%.
"I think [the market] is kind of wavering right now as the 10-year yield is hovering right around those October highs," Adam Turnquist, chief technical strategist at LPL Financial said. "We're watching for an official breakout on the 10-year. ... I think if we start moving higher, that's certainly a warning sign for maybe a little bit deeper pullback in equity markets."
While Turnquist said he is not bearish on stocks, he thinks "we're in the pullback phase of a bull market." The strategist named the industrial sector as his top pick.
Crossmark Global Investments' Victoria Fernandez similarly expects a continuing pullback in the market, which she said will be influenced by climbing yields and a more cautious consumer.
"I think we're gonna see higher yields bite a little bit," said Fernandez, the firm's chief market strategist. "Now that we're through earnings, it's the macro story that's going to be driving a lot of what we see in market volatility, and positive macro stories are really a double-edged sword because all that does is tell the Fed that their financial conditions are not tight enough."
Investors are anticipating Powell's speech at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming this Friday.