Stocks fell on Tuesday as corporate results from Caterpillar and 3M disappointed investors, but managed to recover most of their losses as McDonald’s and defensive stocks like Procter & Gamble all rose.
Dow Jones Industrial Average dropped 102 points while the S&P 500 declined 0.5 percent. The Nasdaq Composite fell 0.4 percent. The small-caps Russell 2000 dropped 0.5 percent and turned negative for the year.
At its session lows, the Dow had fallen 548.62 points, while the S&P 500 and Nasdaq had lost more than 2 percent each. The comeback was led by McDonald’s, which rose more than 6 percent on strong earnings, and a half a percent gain in Procter & Gamble.
“We broke below that 2,700 level on the S&P 500 and buyers came out of the woodworks,” said Jeff Kilburg, CEO of KKM Financial. “I think people were waiting for this and are now more comfortable” buying at these levels. But while he finds the move to be impressive, Kilburg said there will be more volatility moving forward.
The S&P 500 was on pace for its fifth straight decline and briefly dipped below the lows hit earlier this month during this ongoing sell-off. The major indexes are all down at least 5.9 percent for October.
Caterpillar dropped 6.6 percent following the release of its results. The company said its manufacturing costs rose due to higher material and freight costs. Material costs were driven by higher steel prices and tariffs. This drop adds to Caterpillar’s steep monthly losses. Through Monday’s close, the stock is down 15.6 percent for the month.
The U.S. and China have implemented tariffs on billions of dollars worth of their goods this year, increasing costs for companies and raising fears that tighter global trade conditions could slow down the global economy. Negotiations between the two countries have stalled recently, increasing fears that this spat will be prolonged.
“We just look like we’re getting further away from a deal with China,” said Art Hogan, chief market strategist at B. Riley FBR. “The ramifications of a prolonged trade war are really seeping into investors’ minds right now.”
“I think we’re coming to a capitulation point,” he said.