By Anora Mahmudova and Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- So-called momentum plays led a selloff
in U.S. stocks on Tuesday that pulled the Dow Jones Industrial
Average and S&P 500 further from record levels.
Shares of biotechnology, Internet and small-cap companies were
battered for a second day.
The Dow Jones Industrial Average(DJI) dropped 117.59 points, or
0.7%, to a preliminary 16,906.62, while the S&P 500(SPX) shed
13.94 points, or 0.7%, to 1,963.71. The Nasdaq Composite(RIXF) lost
60.07 points, or 1.35%, to 4,391.46. The iShares Nasdaq
Biotechnology ETF (IBB) fell 2.1%, while Global X Social Media
Index ETF (SOCL) fell 4.2%.
The Russell 2000(RUT) fell 14.6 points, or 1.2% to 1,172.15,
adding to steep losses on Monday.
Rob Stein, chief executive officer of Astor Investment
Management, said investors shouldn't be alarmed by Tuesday's
pullback.
"When markets reach new peaks, investors tend to take
opportunity and lighten up and rebalance. We think the economy is
in its midcycle and has more room to grow. In this environment our
risk-reward model is still favoring stocks with decent expected
returns for the next several quarters," Stein said.
The latest earnings season received its unofficial kickoff after
the market's close, as Alcoa Inc. released its second-quarter
results.
Investors had a light load of economic news to digest during the
session. A small-business optimism index showed a June dip amid a
big fall in those who expect the economy to improve. Job openings
at U.S. workplaces rose to 4.64 million in May -- the most since
June 2007 -- from 4.46 million in April.
Richmond Federal Reserve President Jeffrey Lacker said the Fed
must be pre-emptive, hiking rates before inflation emerges. In
contrast, Minneapolis Fed President Narayana Kocherlakota
downplayed recent higher readings on inflation, saying he expects
the price level to stay below the central bank's target for several
more years, possibly even until 2018.
After the close, Alcoa (AA) reported adjusted per-share earnings
of 18 cents on revenue of $5.84, topping Wall Street's estimates.
Shares rose 1.5% in after-hours trading.
Among individual stocks, TripAdvisor Inc. (TRIP) was left off
Wunderlich Securities' list of analyst favorites for the second
half of the year. Stock fell 5.6%, making it the biggest loser on
the S&P 500.
Tesla Motors Inc. (TSLA) shares dropped 1.6% as the electric car
company is being sued in China for trademark infringement. (Read
more in the Movers & Shakers column
http://www.marketwatch.com/story/alcoa-allergan-and-petsmart-are-stocks-to-watch-2014-07-07.)
In other markets, the Nikkei 225 index closed down 0.4%, though
the rest of Asia largely held steady. The Stoxx Europe 600 pulled
back after weak German trade data supported the view that economic
activity in the country is slowing.
Gold prices(GCQ4) fell a third consecutive session to their
lowest settlement in more than two weeks. Crude oil settled
slightly lower. The British pound (GBPUSD)slipped on unexpectedly
weak U.K. factory data.
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