Stocks declined in morning trading Tuesday as investors parsed through Federal Reserve Chair Janet Yellen's semi-annual economic report to Congress, a number of corporate earnings and government economic data. Yellen raised the possibility that the Fed could lift its key short-term interest rate should the labor market improve faster than anticipated.
KEEPING SCORE: The Standard & Poor's 500 index fell five points to 1,971 as of 11:16 a.m. Eastern Time. The Dow Jones industrial average slipped 16 points, or 0.1 percent, to 17,038. The Nasdaq composite slid 29 points, or 0.7 percent, to 4,411.
YELLEN SPEAKS: Yellen told Congress that the Fed intends to keep providing significant support to the U.S. economy to boost growth and improve labor market conditions, noting that the economic recovery is not yet complete.
ALL ABOUT JOBS: Employers added 288,000 jobs last month, the fifth straight month of gains above 200,000. The national unemployment rate has slid to 6.1 percent, a 5 1/2-year low. Yellen noted that if labor market conditions continue to improve more quickly than anticipated, the Fed could raise its key short-term interest rate sooner than currently projected.
THE QUOTE: "In light of corporate earnings being good, retail sales being good, manufacturing being good, even a data-driven Fed chairman is going to have to raise rates earlier than the market really wants," said Doug Cote, chief market strategist at Voya Investment Management. "So all the good fundamental data that should be good for the markets is also hawkish for rates."
BANKS BEAT: Shares in JPMorgan Chase and Goldman Sachs rose after the banks reported better-than-expected financial results. JPMorgan, the nation's largest bank by assets, said second-quarter earnings fell 9 percent as revenue at its investment banking and mortgage businesses dropped. The stock gained $2.19, or 3.9 percent, to $58.48. Goldman's profit rose 5 percent, helped by record results from investment banking. Goldman gained $1.26, or 0.8 percent, to $168.21.
WHAT A DRAG: Cigarette maker Reynolds American said Tuesday it plans to buy rival Lorillard for about $25 billion in a deal to combine two of the nation's oldest and biggest tobacco companies. Reynolds fell $2.56, or 4.1 percent, to $60.61, while Lorillard sank $5.03, or 7.5 percent, to $62.19. Other tobacco stocks also declined: Altria Group slipped 98 cents, or 2.3 percent, to $42.37, while Philip Morris International fell $1.08, or 1.3 percent, to $84.87.
SECTOR WATCH: Seven of the 10 sectors in the S&P 500 fell, with energy the biggest decliner. Financials led the gainers.
SPENDING BAROMETER: The Commerce Department reported Tuesday that retail sales rose just 0.2 percent last month, held back by a sharp drop at building materials and garden supply stores. Sales also fell at restaurants and at auto dealers. The latest figures suggest that Americans are reluctant to spend freely, which could slow growth in the April-June quarter.
OVERSEAS MARKETS: European markets were mostly lower. Germany's DAX fell 0.6 percent and Britain's FTSE 100 fell 0.5 percent. France's CAC-40 fell 1 percent. In Asia, Japan's Nikkei 225 rose 0.6 percent after a central bank policy meeting ended as expected with no changes to Tokyo's ultra-loose monetary policy. Hong Kong's Hang Seng gained 0.5 percent and South Korea's Kospi rose 0.9 percent.
BONDS & COMMODITIES: In the market for U.S. government bonds, the yield on the 10-year Treasury note edged up to 2.56 percent from 2.55 percent late Monday. The price of oil slipped 1.8 percent to $99.06.
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