Wall Street sinks as hopes fade for rate cuts, trade progress

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NEW YORK (Reuters) – Wall Street stock indexes fell on Tuesday, led by a sharp selloff in technology shares, as simmering trade concerns and disappointing economic data sent buyers to the sidelines, while the Federal Reserve chairman pushed back on pressure from President Donald Trump to cut interest rates.

All three major U.S. stock indexes ended the session in the red after Powell said the Fed was grappling with whether trade uncertainties and other issues warrant rate cuts.

Speaking at the Council on Foreign relations, Powell also reiterated the Fed’s independence, a day after Trump tweeted the Fed “doesn’t know what it’s doing.”

Earlier, St. Louis Fed President James Bullard in an interview with Bloomberg said he does not think the Fed needs to cut rates by a half-percentage point at its next policy meeting in late July.

Bullard last week said he had dissented at the Fed’s June policy meeting because he felt that weak inflation and uncertainties about the economic outlook supported a rate cut.

“Powell and Bullard both made comments that were indicative that we might not see any rate cut in July,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “After last week’s meeting, hopes for a rate cut took off and that might not be in the picture next month.”

“Likewise, last week there was a higher level of hope that something positive will come out of the G20 meeting,” Tuz added. “As the date approaches that optimism is waning a little bit.”

Indeed, U.S.-China trade war anxieties found no relief in a White House official’s remarks that Trump is “comfortable with any outcome” resulting from a planned meeting with Chinese President Xi Jinping at the Group of 20 summit convening in Japan on Friday.

On the economic front, new home sales and consumer confidence numbers both came in well below economist expectations, according to separate reports from the U.S. Commerce Department and the Conference Board.

The Dow Jones Industrial Average fell 179.32 points, or 0.67%, to 26,548.22, the S&P 500 lost 27.97 points, or 0.95%, to 2,917.38 and the Nasdaq Composite dropped 120.98 points, or 1.51%, to 7,884.72.

Of the 11 major indexes in the S&P 500, ten lost ground, with technology and communications services seeing the biggest percentage drops.

“Weakness in those stocks shows people getting out of the market, out of ETFs,” Tuz said.

Rate-sensitive bank stocks were down 0.6%, as U.S. Treasuries benchmark yields fell below the closely watched 2% level.

AbbVie Inc said it would buy Allergan Plc for about $63 billion, sending the Botox maker’s shares up by 25.4%. AbbVie’s stock dropped 16.3%.

Tyson Foods Inc and Pilgrims Pride Corp dipped 1.1% and 1.3%, respectively, after the U.S. Department of Justice opened a criminal probe over possible poultry price fixing.