The Dow Jones Industrial Average fell 64.19 points, or 0.17 percent, to 38,563.8. The S&P 500 sank 30.06 points, or 0.60 percent, to 4,975.51. The Nasdaq Composite Index shed 144.87 points, or 0.92 percent, to 15,630.78.
Ten of the 11 primary S&P 500 sectors ended in red, with technology and consumer discretionary leading the laggards by losing 1.27 percent and 1.0 percent, respectively. Meanwhile, consumer staples bucked the trend by rising 1.13 percent.
The tech-heavy Nasdaq suffered a sell-off as traders took profits in high-flying tech stocks, said Vladimir Zernov, analyst with market information supplier FX Empire.
Ahead of its earnings report scheduled for Wednesday after the bell, Nvidia's shares dropped by 4.35 percent. While expectations for impressive results from Nvidia are high, investors have voiced concerns regarding its extremely high valuation.
"With technology now trading at close to 30x forward estimates, that seems to be a ceiling for the tech sector. Makes it pretty hard for additional PE multiple expansion," said Sam Stovall, chief investment strategist at CFRA Research. "What investors have to wait on is for earnings to come in better-than-anticipated so that the 2024 and 2025 estimates end up being improved."
However, on the heels of the S&P 500 surpassing 5,000 for the first time earlier this month, Goldman Sachs has raised its year-end forecast for the index to 5,200 amid an upbeat earnings outlook, while UBS has also elevated its year-end target for the S&P 500 to 5,400, marking the highest projection among major Wall Street banks.
Also on Tuesday, The Conference Board retracted its longstanding prediction of a recession in the U.S. economy, while its Leading Economic Index still indicates a stagnation in economic output in the coming months. The index, designed to forecast future economic activity, decreased by 0.4 percent in January to 102.7, marking the lowest level since April 2020. This period coincided with a brief recession in the United States following the onset of the COVID-19 pandemic and the subsequent shutdowns.
In terms of individual stocks, financial stocks attracted attention on Tuesday after the announcement that Capital One Financial had reached an agreement to acquire Discover Financial Services in an all-stock transaction valued at 35.3 billion U.S. dollars. The deal is anticipated to be finalized in late 2024 or early 2025. In response to the news, Discover experienced a surge of over 12 percent.
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