Written by Sinead Carew and Lisa Pauline Matakkal
(Reuters) – Wall Street’s main indexes closed lower on Tuesday as investors took profits from the post-election rally and grew cautious ahead of U.S. economic data due out this week.
The three major indexes had risen to their highest since the Nov. 5 U.S. presidential election as investors bet that President-elect Donald Trump’s tax cuts and prospects for deregulation would boost stocks.
However, investor enthusiasm cooled on Tuesday. European stocks fell 2% as European Central Bank policymakers warned that President Trump’s tariff hikes would hurt global growth.
Some stocks expected to do well under the Trump administration have regained their gains, with electric car maker Tesla stock falling during Tuesday trading after rising nearly 40% since Election Day.
The Russell 2000 index of small-cap stocks stalled after closing at a three-year high on Monday. Rising U.S. Treasury yields also had a negative impact on stock prices as bond investors priced in President Trump’s policies.
“The yield on the 10-year Treasury is kind of creating a headwind to rising stock prices,” said Jack Ablin, the firm’s chief investment officer. “There are contradictory signals that the market is rebounding.” Cresset capital.
“The problem lies between tariffs, tax cuts, and immigration restrictions that are actually driving inflationary pressures that bond markets cannot ignore.”
Russell Price, chief economist at Ameriprise Financial, said the pressure on U.S. stocks was compounded by profit-taking ahead of inflation data, as well as weaker overseas stocks.
“When a stock enters the market after a very strong run to date and has already experienced some downside, investors tend to want to lock in profits in case the stock continues to fall,” Price said. ” he said.
Investors will be watching Wednesday’s consumer price inflation data, followed by producer price inflation and retail sales data later this week, which could provide clues about the Federal Reserve’s future policy direction. This is because there is a possibility that
Price said this data poses short-term risks to investments. “That’s very likely contributing to the slight downside we’re seeing today.”
According to preliminary data, the S&P 500 Index fell 17.17 points, or 0.29%, to end at 5,984.18 points, while the Nasdaq Composite Index fell 16.00 points, or 0.08%, to 19,282.76 points. The Dow Jones Industrial Average fell 377.45 points, or 0.85%, to $43,915.68.
Markets are already dialing back expectations for rate cuts next year, given strong economic data and the potential inflationary impact of some of Trump’s policies.
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