The Dow Jones Industrial Average fell 404.64 points, or 1.04 percent, to 38,585.19. The S&P 500 sank 52.30 points, or 1.02 percent, to 5,078.65. The Nasdaq Composite Index shed 267.92 points, or 1.65 percent, to 15,939.59.
Eight of the 11 primary S&P 500 sectors ended in red, with technology and consumer discretionary leading the laggards by losing 2.19 percent and 1.31 percent, respectively. Meanwhile, energy and consumer staples led the gainers by rising 0.74 percent and 0.34 percent, respectively.
The Services Purchasing Managers' Index (PMI) for February registered at 52.6 percent, indicating growth but representing a slight decrease of 0.8 percentage points from January's reading of 53.4 percent. The composite index has shown growth for 14 consecutive months, rebounding from a reading of 49 percent in December 2022, which marked the first contraction since May 2020 (45.4 percent). The Business Activity Index also increased to 57.2 percent in February, up 1.4 percentage points from January's reading of 55.8 percent, the Institute for Supply Management reported Tuesday.
Investors were increasingly attentive to Powell's testimony to Congress on Wednesday, followed by the U.S. Senate Committee on Banking, Housing, and Urban Affairs on Thursday. His remarks will be scrutinized closely for any deviation from the stance that policymakers must be assured that inflation is under control before considering any policy adjustments.
"There's not much in the way of a catalyst for the move lower besides the fact that the market has come so far so fast, and investors appear to be looking over their shoulders for Fed Chair Powell's congressional testimony tomorrow and Thursday," wrote Paul Hickey, co-founder of Bespoke Investment Group. "Since the Fed started hiking rates in 2022, Powell has been known to take a crowbar to the knees of any rally, so some apprehension is understandable."
Also on Tuesday, Apple experienced a decline of nearly 3 percent following a report from Counterpoint Research indicating a significant drop in iPhone sales in China during the first six weeks of 2024.
Several other large-cap technology stocks, including Tesla, Netflix, and Microsoft, also saw declines exceeding 3 percent. The information technology sector of the S&P 500 led the overall index lower, experiencing a drop of more than 2 percent.
Meanwhile, AMD faced a setback after Bloomberg News reported that the chipmaker encountered regulatory obstacles preventing it from selling an artificial intelligence chip to China. GitLab experienced a substantial decline of over 20 percent after the software company released a weak forecast for the full year.
"The taller they grow, the harder they fall," said Scott Ladner, chief investment officer with Horizon Investments, of struggling tech stocks. "What's going on today, internally, is the stuff that has been winning all year long is the stuff that's getting sold."
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