NEW YORK ( TheStreet) -- U.S. stocks dropped on Tuesday with little market-moving news to sustain the rally that swept benchmark indices to record highs last week. After smashing through its 17,000-level days earlier, the Dow Jones Industrial Average tumbled below the threshold. The session marked a quiet period between a jam-packed economic calendar last week and the kickoff of the unofficial earnings season after the bell.
Ongoing chatter about an earlier-than-expected rate hike by the Federal Reserve continues to underpin market caution. As nuggets of data out last week pointed to an economy well on the mend, more and more investors are starting to expect that the U.S. central bank must expedite its timetable for scaling back its ultra-loose monetary policy.
At market close, the Dow was down 0.69% to 16,906.62. The S&P 500 retreated 0.7% to 1,963.71. The Nasdaq dumped 1.4% to 4,391.46.
Markets are looking likely to close lower for their second day in a row after cresting highs days earlier, a move which Raymond James analyst Jeffrey Saut notes is similar to a trend seen in the summer of 2011, a period that suffered a 18% decline."While I do not think any pullback from here will be that severe, I do think we are vulnerable to a 10%-12% decline in the weeks ahead, albeit within the construct of a secular bull market that has years left to run," Saut wrote in a note. Second-quarter earnings season unofficially began Tuesday after the markets closed with the announcement of Alcoa's (AA - Get Report) results. The aluminum maker reported second-quarter earnings of 18 cents a share, 6 cents higher than analysts surveyed by Thomson Reuters expected. S&P Capital IQ consensus estimates point to a second-quarter 2014 earnings increase of 6.6%, nearly twice the 3.4% year-over-year gain a quarter earlier. The Labor Department's Job Openings and Labor Turnover survey for May showed little movement. The survey indicated 4.6 million job openings on the final business day of May, little changed from 4.5 million in April. Likewise, a hires rate of 3.4% and separations rate of 3.2% barely moved over the month. July 8 Premarket Briefing: 10 Things You Should Know Stock Market Today: Stocks' Record Run Ends on Eve of Earnings Season European Stocks Fall on U.K. Manufacturing Slump European stocks continued to lose steam on Tuesday, as disappointing corporate news and an unexpected U.K. manufacturing slump caused some jitters. Furthermore, German imports and exports declined more than expected in May, signaling a weakening of Europe's largest economy. Asian stocks were mixed. In Hong Kong, the Hang Seng was unchanged at 23,541.38, while in Tokyo the Nikkei shed 0.42% to 15,314. On Monday, U.S. benchmark indices tumbled after a record-breaking run to close out last week. Few industries were left untouched by a broad-based selloff over the session. High-momentum tech names were some of the worst-performing shares on Tuesday, dragging heavily on the Nasdaq. Facebook (FB) dropped 3.9% to $62.76, Twitter (TWTR) plunged 7% to $37.41, and Netflix (NFLX) slipped 3.4% to $445.05. Apple (AAPL - Get Report) wasn't exempt, sliding 0.64% after The Wall Street Journal reported CEO Tim Cook is actively seeking new directors to add to the company's eight-person board. Tesla (TSLA) shares were surrendering 1.6% after it was reported that the electric car maker is being sued in China for trademark infringement, a surprise development that casts a shadow over CEO Musk's ambition to expand rapidly there, Reuters reported. Box, the online-storage startup, raised $150 million in funding from private-equity firm TPG and hedge fund Coatue Management, the company said on Monday in a regulatory filing. Longview Asset Management is urging PetSmart's (PETM) board to consider strategic alternatives, including exploring a sale of the company, shortly after activist hedge fund Jana Partners proposed this path for PetSmart. Crumbs (CRMB), the cupcake shop, said it will close all its stores a week after it was delisted from the Nasdaq. --By Keris Alison Lahiff and Andrea Tse in New York.