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Stocks hit a wall after their two-day rally

Wednesday was the latest move down for a stock market that has yo-yoed since setting a record high earlier this month. Above, the New York Stock Exchange in Manhattan.
(Bryan R. Smith / AFP/Getty Images)
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Stocks retreated Wednesday and gave back some of their gains from Tuesday, which was one of the best days of the year for the Standard & Poor’s 500 index.

Advertising companies and retailers had some of the steepest drops on worries about their earnings, while prices for Treasury bonds and gold rose modestly as investors sought safer ground. Wednesday was the latest move down for a stock market that has yo-yoed since setting a record high earlier this month.

The Standard & Poor’s 500 index fell 8.47 points, or 0.3%, to 2,444.04, relinquishing about a third of Tuesday’s big gain. The loss snapped a two-day winning streak that followed a nearly two-week slump. After all its back and forth, the S&P 500 is still within 1.5% of its record high.

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The Dow Jones industrial average fell 87.80 points, or 0.4%, to 21,812.09. The Nasdaq composite fell 19.07, or 0.3%, to 6,278.41. The Russell 2000 index of small-cap stocks fell 1.80, or 0.1%, to 1,369.74.

Advertising companies had the biggest losses in the S&P 500 after an industry giant cut its forecast for revenue this year. WPP warned that its clients are feeling pressure to control their spending, and its shares plunged 10.9% in London. In the U.S., Omnicom Group slid 7% to $72.66 and Interpublic Group declined 6.3% to $19.58.

Home-improvement retailer Lowe’s also dragged down the S&P 500, falling 3.7% to $73.01 after it reported profit and revenue for the latest quarter that were weaker than analysts expected. It also gave a profit outlook for the year that fell short of Wall Street’s forecast, and a report showing that sales of new homes were weaker in July than economists expected didn’t help either.

La-Z-Boy dived 20.2% to $24.95 after the furniture company said it had a weak fiscal first quarter as its upholstery manufacturing business struggled.

Western Digital rose 1.9% to $88.31 after a report that the Irvine hard drive maker is again in talks to buy Toshiba’s flash memory business.

Worries about politics were a big reason for the market’s stumbles in recent weeks. In Washington, the concern is about whether the government can push through tax cuts and other pro-business policies that were considered slam dunks earlier this year. Now, the market seems to have little to no expectation for much help coming from Washington, said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

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“Actions speak louder than words, and when we see actual action, you’ll see markets sit up and take notice,” she said. “But so far it’s been a rhetorical exercise.”

She said she noticed chief executives talking a lot about their hopes for tax reform or infrastructure spending earlier this year, when companies were reporting their results for the January-through-March quarter. But in conference calls the last few weeks, as CEOs reported their results for the spring quarter, Nixon heard much less of such talk.

The government is coming close to some crucial deadlines, including one to increase its borrowing authority in order to avoid a default on its debt and another to prevent a government shutdown.

In a speech late Tuesday, President Trump said that “if we have to close down our government, we’re building that wall” that he wants on the border between Mexico and the United States. He also said that he thinks the U.S. government will “end up probably terminating” the North American Free Trade Agreement with Canada and Mexico, though he said that he has yet to make up his mind.

Markets are also looking toward the mountains of Wyoming, where central bankers from around the world are gathering soon.

The heads of the Federal Reserve and the European Central Bank are expected to speak at a symposium that begins Thursday, and investors are waiting to hear if any change is upcoming in their support for the global economy.

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Most analysts expect to hear nothing surprising from the meeting. The Fed has already begun raising interest rates and is preparing to pare back the $4.5 trillion in Treasurys and other investments it has amassed.

Prices for Treasurys rose Wednesday, which in turn pushed down yields. The 10-year Treasury yield fell to 2.16% from 2.21%. The two-year yield fell to 1.31% from 1.33%, and the 30-year yield fell to 2.75% from 2.79%.

The dollar fell to 109.01 yen from 109.52 yen. The euro rose to $1.1821 from $1.1752. The British pound fell to $1.2804 from $1.2828.

Benchmark U.S. crude oil rose 58 cents to settle at $48.41 a barrel. Brent crude, the international standard, rose 70 cents to $52.57 a barrel.

Natural gas fell 1 cent to $2.93 per 1,000 cubic feet. Heating oil rose 3 cents to $1.62 a gallon. Wholesale gasoline rose 3 cents to $1.62 a gallon.

Gold rose $3.70 to $1,294.70 an ounce. Silver rose 6 cents to $17.05 an ounce. Copper fell a penny to $2.98 a pound.

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In overseas stock markets, the French CAC 40 fell 0.3%, Germany’s DAX dropped 0.5%, and the FTSE 100 in London was close to flat. Japan’s Nikkei 225 rose 0.3%. South Korea’s Kospi was virtually flat.


UPDATES:

2:35 p.m.: This article was updated with closing prices, context and analyst comment.

8:05 a.m.: This article was updated with market prices and context.

This article was originally published at 7 a.m.

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