Stocks slipped on Tuesday as investors digested a sharp rebound from a strong sell-off last week.
Bank shares such as Citigroup (NYSE:C), Bank of America (NYSE:BAC) and JP Morgan Chase (NYSE:AMJ) all traded lower as Treasury yields pulled back. The benchmark 10-year yield fell about 4 basis points, or 0.04 percentage points, to 1.55%.
Home Depot (NYSE:HD) helped keep losses in check. Shares of the home improvement retailer rose 4.4% on better-than-expected earnings. However, Home Depot warned tariffs could hit consumer spending and cut its full-year revenue outlook.
Equities rose sharply on Monday as a rebound in bond yields continued, easing ongoing recession fears. The White House has also stepped in the ongoing debate over whether the U.S. economy will soon enter into recession mode, highlighting the strength in the U.S. economy.
Nonetheless, The Washington Post and New York Times both reported the Trump administration was discussing a cut to payroll taxes as a way to mitigate slower economic growth. A White House official pushed back on the reports, saying cutting payroll taxes “is not something under consideration at this time. ”
Traders have been worried about the global economy as the U.S. and China remain engaged in a trade war. Wall Street got a reprieve on that front on Monday after U.S. Commerce Secretary Wilbur Ross announced that it was extending by another 90 days a temporary reprieve for Huawei to do business with American firms.
Jim Paulsen, chief investment strategist at The Leuthold Group, said worries over the economy are also arising because of fears that “overused economic policies have become futile.”
“However, maybe the prowess of economic authorities is not nearly as compromised as advertised,” Paulsen said in a note. “Economic policies do not work immediately. They have varied lags before impacting the character of the economy. On average, many economic policies take about one year before their impact is obvious,” Paulsen said.
Traders also looked ahead to the release of the Federal Reserve’s minutes from its July meeting. The central bank cut rates by 25 basis points last month, citing “global developments ” and “muted inflation.” The Fed minutes are scheduled for release Wednesday at 2 p.m. ET.
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