The Dow and broader U.S. stock market turned lower Tuesday afternoon, negating what could have been a new six-month high for the S&P 500. A key measure of market volatility fell to its lowest level in over five months before reversing course later in the afternoon.
The broad S&P 500 Index of large-cap stocks rose by as much as 0.5% to 3,378.84. In doing so, it came within 0.2% of the February 19 high.
The benchmark index tumbled down the stretch and eventually closed down 0.8% at 3,333.69.
Losses were reported across most major S&P 500 sectors , with utilities leading the pack. Shares of information technology companies also fell sharply.
The Dow Jones Industrial Average rose by as much as 361 points before reversing gains. The Dow settled down 104.53 points, or 0.4%, at 27,686.91.
Meanwhile, the technology-focused Nasdaq Composite Index fell 1.7% to 10,782.82.
Trading volumes have eased this month due to the summer vacation season. Low volumes are expected to persist until after Labor Day. September and October are typically much more volatile for U.S. equities.
The S&P 500 snapped a seven-day winning streak, which was underpinned by improved investor sentiment towards the economy and pandemic. Calmer trading conditions also reflected in the CBOE VIX, which tracks expected volatility over the next 30 days.
On Tuesday, the VIX bottomed at 20.28, the lowest since February. The losses proved short-lived as the VIX rocketed 8.6% higher by the close.
The VIX is down around 70% from its March peak but remains elevated compared with past bull markets. (The last time the S&P 500 made all-time highs, the VIX was below 15.)
U.S. stocks are riding high on government stimulus hopes after President Trump signed executive orders to expand unemployment and other benefits.
At current levels, markets are pricing in another multi-trillion-dollar stimulus bill, according to Nicholas Brooks of Intermediate Capital Group.
Markets are assuming that ultimately Congress will come through with a package, and that there’s a lot of brinkmanship going on.
Video: What impact, if any, will Trump’s executive orders have?
President Trump issued executive orders on jobless benefits and other relief over the weekend, upping the pressure on Democrats to return to the negotiating table. Treasury Secretary Steven Mnuchin believes states could begin paying out additional federal jobless payments within two weeks.
Democrats in Congress are backing a $3.5 trillion stimulus bill, which is much higher than the one put forward by Republicans.