By Allison Prang and David Hodari
U.S. stocks dropped Tuesday, fueled by declines in highflying technology and financial shares.
Major indexes opened higher, and the Dow Jones Industrial Average climbed as much as 197 points in morning trading after the latest round of inflation data showed consumer prices increased more modestly in February than in the previous month.
But shares turned broadly lower by midday, with eight of the 11 sectors in the S&P 500 ending the session in the red.
The Dow fell 171.58 points, or 0.7%, to 25007.03, while the S&P 500 declined 17.71 points, or 0.6%, to 2765.31. The tech-heavy Nasdaq Composite dropped 77.31 points, or 1%, to 7511.01, breaking a seven-session winning streak.
Tech stocks were the weakest performers in the S&P 500, falling 1.2%, after a big rally in 2018. Chip maker Qualcomm fell $3.11, or 5%, to $59.70, after President Donald Trump late Monday blocked Broadcom's $117 billion hostile takeover bid on national security grounds.
Dan Morgan, senior portfolio manager at Synovus Trust, said the Broadcom and Qualcomm deal intervention weighed on sentiment.
Mr. Trump's involvement in a possible Broadcom and Qualcomm deal "opens the door that any future merger or acquisition...could have intervention from the president," he said, adding that Mr. Trump's move was unprecedented in his mind.
"I don't remember a president ever doing that," he said.
Meanwhile, financial stocks in the S&P 500, another top-performing sector this year, fell 1.1% alongside a decline in bond yields. Lower yields normally bode poorly for banks' net interest margins, a key measure of lending profitability.
The yield on the U.S. 10-year Treasury note settled Tuesday at 2.848%, down from 2.870% on Monday. Yields move inversely to prices.
Before the opening bell, the Labor Department said the consumer-price index, which measures what Americans pay for everything from shampoo to hotel stays, rose 0.2% in February after climbing a seasonally adjusted 0.5% in January. The results matched expectations from economists surveyed by The Wall Street Journal.
But Mr. Morgan of Synovus Trust said investors are growing wary of the long-running bull market and are nervous about the yield curve and "bigger-theme items."
Even when investors get good news like the latest inflation numbers, "it's almost like the tone is still somewhat down," he said.
President Trump also said Tuesday he would nominate Central Intelligence Agency Director Mike Pompeo as secretary of state to replace Rex Tillerson. Some traders played down the impact of the recent turnover in the administration.
"This is now what is expected to be normal," said Matt Miskin, market strategist at John Hancock Investments.
A lack of inflationary jitters during 2017 allowed U.S. stock indexes to leap to multiple records early in 2018, while investors kept long-term bond yields subdued.
Since the start of February, however, rising inflation in both the U.S. and Europe has prompted investors to second-guess central-bank guidance, fueling speculation about tighter monetary policy.
The inflation data were released against a fraught trading backdrop, with the Trump administration's announcement of tariffs on steel and aluminum imports having provoked rebukes from China and the European Union in recent days. How those trading partners now respond may have broader implications for global economic growth, analysts say.
"The chances of a global recession in the next year or two are already rising and if you add to that a slowdown in the rate of trade -- not just a slowdown in trade growth -- it could have repercussions for global economies," said Edmund Shing, global head of equity derivative strategy at BNP Paribas.
Elsewhere, the Stoxx Europe 600 slipped 1%, after Asia-Pacific indexes shrugged off early pressure.
In Asia, Japanese stocks closed up 0.7%, erasing earlier losses. The Shanghai Composite fell 0.5% on news that China plans to merge its banking and insurance regulators.
Kenan Machado contributed to this article.
Write to Allison Prang at firstname.lastname@example.org and David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
March 13, 2018 17:22 ET (21:22 GMT)
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