Wall Street also digested congressional testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin.
Further strains in the deteriorating U.S.-China relationship were putting a damper on market sentiment. Bloomberg reported that Nasdaq was planning new rules that would make initial public offerings more difficult for some Chinese companies.
The Dow Jones Industrial Average finished down 390 points, or 1.59%, to 24,206, the S&P 500 slipped 1.05% and the Nasdaq was off 0.54%.
The S&P 500 finished Monday with a gain of 3.2%, its best session since early April, after a coronavirus vaccine candidate from Moderna showed positive results in early-stage trials, and Powell expressed optimism the country can begin to rebound in the second half of 2020.
Moderna (MRNA) - Get Report shares ended down Tuesday after STAT News published an article citing experts who suggested “we ought to take the early readout” from the company’s vaccine Phase 1 trial “with a big grain of salt.”
The possibility of a vaccine to combat the deadly coronavirus was embraced by Wall Street as the U.S. economy begins to gradually reopen after shutting down during the pandemic.
“The question of how quickly people come back, or will they come back to the way they used to do things, that’s much different if you have a vaccine,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.
Walmart posted stronger-than-expected first-quarter earnings as customers loaded up on low-margin items such as food and consumer staples amid the peak of the coronavirus pandemic.
Home Depot, however, posted earnings in the first quarter that were weaker than expected and the home-improvement retailer scrapped its 2020 profit guidance. The company said pretax costs to counter the coronavirus pandemic reached $850 million.
Powell, who testified before the Senate committee concerning the $2 trillion economic-relief package, said the Fed would double down on its commitment to do all it can to keep financial markets functioning and liquid.
“We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response,” Powell said.
Powell noted the central bank had taken its policy interest rate to near zero as the coronavirus pandemic forced shutdowns of much of the economy in March.
“We expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals,” he said in his prepared testimony.
He said that more fiscal aid from Congress may be needed but added he was making his comments on fiscal policy "on a general level" and was "reluctant to talk about timing and specific provisions."
Housing starts, meanwhile, fell 30.2% in April, a sharper drop than economists expected. Housing starts came in at a seasonally adjusted annual rate of 891,000 units in April, the lowest level since early 2015, the Commerce Department said.