By Gunjan Banerji and Riva Gold
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 13, 2018).
The Dow Jones Industrial Average fell Monday, snapping a two-session winning streak, as shares of industrial giants slumped.
Boeing, Caterpillar and United Technologies were the biggest drags on the blue-chip index as investors continue to assess the Trump administration's plan to impose tariffs on steel and aluminum imports.
A strong earnings season alongside recent inflation data have buoyed major stock indexes in recent days. But some analysts said they were wary of being in a later part of the economic cycle, one in which the overarching interest-rate environment is shifting and inflation-rate worries that rattled markets in February could return.
Recent economic data and geopolitical news have triggered market volatility, and analysts said the calm permeating much of 2017 was likely gone.
Some pointed to a lack of news on the trade front as a supportive factor for stocks in the short term. U.S. and European officials are planning new trade talks as U.S. allies seek ways to avoid the steel and aluminum tariffs. A broader escalation of trade tensions remains a risk for investors, analysts said.
"This equity market is in a muddle-along zone," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, adding that he expects U.S. stocks to continue to rise, though at a more muted pace than in 2017.
The Dow industrials dropped 157.13 points, or 0.6%, to 25178.61. The S&P 500 swung between small gains and losses, ending the day down 3.55 points, or 0.1%, at 2783.02. The Nasdaq Composite climbed 27.51 points, or 0.4%, to 7588.32, setting a record close for the second consecutive session and extending its winning streak to seven trading days.
Industrial stocks were the biggest decliners in the S&P 500, down 1.2%. Boeing dropped $10.33, or 2.9%, to $344.19. Caterpillar fell 3.75, or 2.4%, to 154.50, and United Tech declined 2.57, or 1.9%, to 131.50. The energy sector also weakened as crude prices slumped.
Inflation data have jolted stock and bond prices in recent days, and investors said they would be monitoring consumer-price index data from the Labor Department on Tuesday for more clues on price pressures.
Inflation chips away at the purchasing power of government bonds, leading to declines in Treasury prices. This, in turn, could make government bonds more attractive relative to stocks, leading some investors to reallocate cash. Inflation rising at a faster rate could also lead the Federal Reserve to accelerate its pace of raising rates.
"Fixed income is becoming more competitive now for equities," Mr. Sandven said.
Stocks got a boost after Friday's U.S. jobs report showed that despite an increase in hiring, wage growth slowed in February while the annual wage gain in January -- which initially sparked the jitters that led to the market's worst selloff in more than two years -- was revised lower.
Some investors said that meant the Federal Reserve was more likely to move only gradually to raise interest rates. Additionally, the strong jobs report may only grant a temporary reprieve for the Fed.
"Both core inflation and wages remain subdued for the moment," said Eric Robertsen, global head of foreign exchange, rates and credit research at Standard Chartered. "But clients expect the combination of fiscal stimulus and [U.S. dollar] weakness to ultimately lead to price pressures" -- forcing the Fed to raise rates faster than had been anticipated.
Commodity prices also headed lower as U.S. crude oil fell 1.1% to $61.36 a barrel and gold declined 0.2% to $1319.40 a troy ounce.
Elsewhere, the Stoxx Europe 600 edged up 0.3% amid a flurry of merger news, echoing a climb in stocks across Asia.
Hong Kong's Hang Seng rose 1.9%, while South Korea's Kospi added 1%, sending both indexes to their highest finish in five weeks.
Write to Gunjan Banerji at [email protected] and Riva Gold at [email protected]