US close: Stocks extend losses as rate cut hopes fade, Fed uncertainty deepens

(Sharecast News) - Major indices delivered a losing performance on Tuesday as investors reassessed the likelihood of a Federal Reserve rate cut later this month. At the close, the Dow Jones Industrial Average was down 0.55% at 45,295.81, while the S&P 500 shed 0.69% to 6,415.54 and the Nasdaq Composite saw out the session 0.82% weaker at 21,279.63.

The Dow closed 249.07 points lower on Tuesday, extending losses recorded in the previous session as weakness in AI-linked tech stocks and cautious inflation data prompted a broad market retreat.

While markets had priced in an 80% chance of easing, several analysts now suggest the odds are closer to 50-50, citing resilient GDP growth, stable financial conditions, and persistent inflation pressures. The shift follows Federal Reserve chairman Jerome Powell's recent remarks at Jackson Hole, which hinted at a possible rate cut but stopped short of committing, with that ambiguity triggering a bout of caution, especially with cyclical stocks outperforming defensives - suggesting investors may have overestimated the urgency for monetary easing.

Uncertainty regarding the future independence of the Federal Reserve drew an amount of investor attention on Tuesday after a court hearing seeking to temporarily block Trump from dismissing Fed Governor Lisa Cook concluded on Friday without a ruling. Separately, Stephen Miran, a Trump nominee to the Fed board, was due to appear before the Senate Banking Committee on Thursday.

Also in focus on Tuesday was news that a federal appeals court has ruled that most of Donald Trump's global tariffs were unlawful, determining that only Congress holds the authority to impose broad levies. The 7-4 decision from the US Court of Appeals for the Federal Circuit was expected to be challenged, with Trump labelling the ruling "Highly Partisan" and vowing to appeal to the Supreme Court.

Market participants were keeping a keen eye on a surge in bond yields to start the month, with the yield on the benchmark 10-year Treasury note jumping to 4.27%, while the 30-year yield sat at roughly 4.96%, as bond investors drove yields higher on the prospect that the US may have to refund the billions brought in from tariffs, worsening America's already-stressed fiscal situation.

On the macro front, operating conditions in the US manufacturing sector improved in August at the fastest pace since May 2022, according to a survey released on Tuesday. The S&P Global manufacturing purchasing managers' index rose to 53.0 from 49.8 in July. A reading above 50.0 indicates expansion, while a reading below signals contraction. The survey found that growth reflected a combination of higher new orders and inventory building.

The Institute for Supply Management's manufacturing PMI increased to 48.7 in August from July's 48.0 reading but fell short of expectations of 49.0, signalling a sixth straight month of contraction, as a sharp drop in production was only partly offset by a rebound in new orders.

Elsewhere, US construction spending fell in July, marking the ninth consecutive monthly decrease. Construction spending decreased by 0.1% month-on-month in July, according to the Census Bureau, coming in at $2.13bn, in line with expectations. Private sector spending dropped 0.2% in July, with the non-residential segment shrinking by 0.5%, while amusement and recreation buildings saw the steepest drop at 1%. On the other hand, residential construction rose by 0.1% month-on-month. On an annualised basis, construction spending slumped 2.8% in July.

No major corporate earnings were released on Tuesday.

Reporting by Iain Gilbert at Sharecast.com

Dow Jones - Risers

Unitedhealth Group Inc. (UNH) $309.38 2.37% Merck & Co. Inc. (MRK) $84.85 1.97% Walmart Inc. (WMT) $97.55 1.60% Procter & Gamble Co. (PG) $157.91 1.44% Johnson & Johnson (JNJ) $177.86 1.39% McDonald's Corp. (MCD) $315.72 1.13% Chevron Corp. (CVX) $161.07 1.10% Coca-Cola Co. (KO) $68.90 0.83% American Express Co. (AXP) $328.27 0.58% Boeing Co. (BA) $237.00 0.40%

Dow Jones - Fallers

Caterpillar Inc. (CAT) $413.98 -4.67% Nike Inc. (NKE) $74.34 -4.61% Goldman Sachs Group Inc. (GS) $723.82 -3.48% International Business Machines Corporation (CDI) (IBM) $239.98 -2.27% 3M Co. (MMM) $154.18 -2.06% Cisco Systems Inc. (CSCO) $67.80 -1.87% Dow Chemical Co. (DOW) $24.25 -1.29% Salesforce.Com Inc. (CRM) $250.95 -1.24% Apple Inc. (AAPL) $229.72 -1.04% JP Morgan Chase & Co. (JPM) $297.80 -0.96%

S&P 500 - Risers

Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) $532.52 8.08% Biogen Inc (BIIB) $139.63 5.60% Helmerich & Payne Inc. (HP) $21.01 4.06% Centene Corp. (CNC) $29.52 3.98% Ralph Lauren Corp (RL) $308.77 3.87% Humana Inc. (HUM) $307.38 3.61% PVH Corp. (PVH) $86.03 3.40% Newmont Corporation (NEM) $75.82 3.38% Elevance Health Inc. (ELV) $320.86 3.36% Take-Two Interactive Software Inc. (TTWO) $240.95 3.29%

S&P 500 - Fallers

Ansys Inc. (ANSS) $0.00 -100.00% Kraft Heinz Co. (KHC) $26.02 -6.97% Transdigm Group Inc. (TDG) $1,299.89 -6.93% Oracle Corp. (ORCL) $223.42 -6.76% Albemarle Corp. (ALB) $79.55 -6.38% Constellation Brands Inc. Class A (STZ) $150.46 -5.46% Stanley Black & Decker Inc. (SWK) $71.59 -4.81% Target Corp. (TGT) $92.16 -4.77% Caterpillar Inc. (CAT) $413.98 -4.67% Nike Inc. (NKE) $74.34 -4.61%

Nasdaq 100 - Risers

Qvc Group Inc Series A (QVCGA) $10.33 20.40% Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) $532.52 8.08% Biogen Inc (BIIB) $139.63 5.60% Take-Two Interactive Software Inc. (TTWO) $240.95 3.29% Ross Stores Inc. (ROST) $151.25 2.78% Vertex Pharmaceuticals Inc. (VRTX) $401.00 2.55% Dollar Tree Inc (DLTR) $111.35 2.00% Western Digital Corp. (WDC) $81.91 1.95% Seagate Technology Plc (STX) $170.50 1.85% Starbucks Corp. (SBUX) $89.78 1.80%

Nasdaq 100 - Fallers

Kraft Heinz Co. (KHC) $26.02 -6.97% Mercadolibre Inc. (MELI) $2,379.76 -3.77% DENTSPLY Sirona Inc. (XRAY) $13.82 -3.43% Align Technology Inc. (ALGN) $137.16 -3.38% Lam Research Corp. (LRCX) $97.03 -3.12% Adobe Systems Inc. (ADBE) $345.63 -3.10% KLA-Tencor Corp. (KLAC) $846.35 -2.94% Trip.com Group Limited (TCOM) $71.59 -2.93% Paychex Inc. (PAYX) $135.96 -2.51% Skyworks Solutions Inc. (SWKS) $73.01 -2.50%