The Nasdaq Composite hit a fresh record high on Tuesday, the first trading day this week, led by Amazon shares. But the broader market was down slightly amid concerns around U.S.-China trade relations and a virus outbreak in China.
Caterpillar and Chevron were among the worst-performing stocks in the Dow, pulling back more than 1% each. The S&P 500 was led lower by the materials and energy sectors.
The Dow was headed for its first decline in six sessions while the S&P 500 and Nasdaq were set to snap a three-day winning streak. U.S. markets were closed Monday due to the Martin Luther King Jr. holiday.
Stocks notched all-time highs on Friday as the market carries its momentum from a strong performance in 2019. The S&P 500 surged more than 28% last year, its biggest annual gain since 2013.
This year, continued optimism around U.S.-China trade relations along with dissipating fears of a global economic recession have built on the 2019 gains.
Still, hedge fund billionaire Paul Tudor Jones is not completely sold on the recent rally.
“We are just again in this craziest monetary and fiscal mix in history. It’s so explosive. It defies imagination,” Jones, founder of Tudor Investments, told CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland.
The market’s record-setting run paused Tuesday after Treasury Secretary Steven Mnuchin told The Wall Street Journal that a phase two trade deal between China and the U.S. may not remove all existing tariffs. “We may do 2A and some of the tariffs come off. We can do this sequentially along the way,” he said.
President Donald Trump also told the Journal he is “absolutely serious” about imposing tariffs on European cars if a trade deal with the region cannot be struck.
Traders work after the opening bell at the New York Stock Exchange (NYSE) on August 5, 2019 in New York City.
JOHANNES EISELE / AFP / Getty Images
Concerns over a new strain of pneumonia in China also drove investors away from stocks. The outbreak of the new coronavirus in China has killed four people with confirmed cases exceeding 200 ahead of the Lunar New Year holiday, during which hundreds of millions of people are expected to travel. Late on Monday, Chinese authorities confirmed that the virus is contagious.
Experts called back the economic fallout from the deadly Severe Acute Respiratory Syndrome (SARS) crisis in 2003, and the news sent investors fleeing from risk assets in Asia overnight, a trend that looks set to continue into the open on Wall Street.
Asian equity markets tumbled overnight. The Shanghai Composite dropped 1.4% while the Hang Seng index slid 2.8%. In Japan, the Nikkei 225 index fell 0.9%. Korea’s Kospi index also pulled back 1%.
Meanwhile, the International Monetary Fund (IMF) on Monday downgraded its global economic growth forecast from 3.4% to 3.3% for 2020. The U.S. economy is projected to grow by 2.0% this year, a downward revision of 0.1 percentage points compared with the IMF’s October 2019 forecast.
But John Augustine, chief investment officer at Huntington Private Bank, thinks this market can yield further returns for investors.
“We think stocks could run for a while, absent some event,” Augustine said. “We’re starting to see signs of confirmation elsewhere. It’s not just the Nasdaq and the big tech names.”
The corporate earnings season will also continue after the bell with Netflix, IBM, United Airlines and TD Ameritrade set to report quarterly figures. So far, the reporting period is off to a good start. More than 70% of the S&P 500 companies that have posted better-than-expected quarterly earnings, FactSet data shows.
—CNBC’s Elliot Smith contributed to this report.