NEW YORK — Sometimes a down day on Wall Street can be a good thing — especially when it shows that investors are carefully weighing their next steps.
Traders collected a few profits Tuesday, leaving the major indexes with fairly modest losses as the market waited for key reports on the government’s assessment of banks’ health and the latest numbers on jobs.
But stocks held on to most of their gains from Monday, which saw the Standard & Poor’s 500 index recoup the last of its losses since the beginning of the year. That advance came on hopeful signs in the housing market and extended a two-month rally that brought stocks up from 12-year lows.
“Today’s action, just drifting around, is not that surprising given Monday’s rally,” said Darin Newsom, a senior analyst at DTN in Omaha.
Many analysts believe it’s good for the market to pause after a big advance, particularly when Wall Street has had its best two-month performance in nearly 35 years. Tuesday’s showing proved that investors aren’t buying with abandon but considering whether they want to put more money into stocks given the challenges the market faces later this week.
On Thursday, the government will release results of its stress tests on banks, and the Labor Department on Friday issues some of the most closely watched data on the Street, its monthly tally of job losses and unemployment.
The Dow fell 16.09 Tuesday, 0.2 percent, to 8,410.65.
The Standard & Poor’s 500 fell 3.44, 0.4 percent, to 903.80. The modest pullback left the index essentially flat for the year to date. The S&P 500 is used as a benchmark for mutual funds and other investments.
The Nasdaq composite lost 9.44, 0.5 percent, to 1,754.12, and the Russell 2000 index of smaller companies fell 4.27, 0.8 percent, to 502.55.
About eight stocks fell for every seven that rose on the New York Stock Exchange, where consolidated volume came to 6.6 billion shares, compared with 6.9 billion shares Monday.
Investors are mindful that the stock market typically turns around, on average, about four months ahead of the economy, so stocks tend to rise even when economic data still isn’t robust. The S&P 500 is up 33.6 percent since Wall Street’s rally began March 10. The Dow is up 28.5 percent.
Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab, said at a media briefing in New York that the economy could have stopped sliding.
“There is some chance — it may not be more than a slim chance — but some chance that we may actually already be out of the recession,” she said.
Still, the market could easily decide to take a less optimistic view of what it sees.
“Over the past several weeks, we’ve come through a period where all data was interpreted through rose-colored glasses,” said Lawrence Creatura, portfolio manager at Federated Investors. “Now, it’s a question of whether investors continue to have that perspective.”
