• TNational Federation of Independent Business Small Business Optimism Index increased in May to 94.4
  • Nasdaq briefly broke through the 10,000 barrier for the first time
  • FOMC rate policy decision due Wednesday

U.S. stocks were mixed on Tuesday as investors took a pause from the recent rally, while strong tech shares briefly sent the Nasdaq above the 10,000 level for the first time ever, ahead of Wednesday's statement from the Federal Reserve. Nasdaq closed at another record high.

The Dow Jones Industrial Average dropped 300.14 points to 27,272.30, while the S&P 500 fell 25.21 points to 3,207.18 and the Nasdaq Composite Index rose 29.01 points to 9,953.75.

Tuesday’s volume on the New York Stock Exchange totaled 5.81 billion shares with 614 issues advancing, 36 setting new highs, and 2,363 declining, with two stocks setting new lows .

Active movers were led by Hertz Global Holdings Inc. (HTZ), Macy's Inc. (M) and NIO (NIO).

The World Bank warned the global economy will shrink by 5.2% this year, the most since World War II, putting millions of people into poverty.

The National Federation of Independent Business Small Business Optimism Index increased in May to 94.4, from April’s 90.9 reading.

“As states begin to reopen, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies,” said NFIB’s Chief Economist Bill Dunkelberg. “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.”

“[Tuesday is] all about giving back some of the sharp gains we’ve seen in those value names,” said Keith Buchanan, portfolio manager at GLOBALT. “The upcoming economic data is going to be even more important. To confirm that [last week’s] payrolls number is critical.”

Analysts are generally cautious on the stock market.

“There are a lot of unknowns that we are dealing with despite the fact that normalizations of economic activities are still on track,” said Frank Tsui, a senior fund manager at Value Partners.

“Equities continue to trend higher in anticipation of improving economic conditions,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “But I think it’s premature to declare happy days are here again. What gives us caution is the duration of Covid-19 remains unknown. We don’t have treatments, we don’t have prevention and we’re a little bit at the mercy of how fast the virus spreads.”

“Recent data points like the jobs report and not-as-bad-as-feared company updates have fueled the view that the worst of the declines could be behind us,” said RBC Capital Markets analysts. “The risk-on trade really is gaining traction. Valuations have spiked to historical highs in many industrial sub-sectors, signaling a strong recovery is potentially taking hold.”

Marc Chaikin, founder of Chaikin Analytics, a quantitative investment research firm based in Philadelphia, said while the road to an economic recovery will be bumpy, “stocks are looking ahead 12-18 months and seeing a return to normalcy. Much depends on whether we experience a second wave of COVID-19 spread after the reopening of the economy, and the onset of cooler weather in the fall. And of course the development of a safe, effective vaccine is also an important assumption that is built into the market’s historic advance and move toward euphoria.”

Overnight in Asia, markets finished mixed. The Shanghai Composite climbed 0.62%; Hong Kong’s Hang Seng rose 1.13%; while Japan’s Nikkei-225 slipped 0.38%.

In Europe markets finished lower, as Britain’s FTSE-100 fell 2.11%, while France’s CAC-40 tumbled 1.55% and Germany’s DAX dropped 1.57%.

Crude oil futures gained 1.52% at $38.77 per barrel, Brent crude fell 0.44% at $41. Gold futures gained 0.91%.

The euro edged up 0.35% at $1.1335 while the pound sterling edged up 0.02% at $1.2726.

The yield on the 10-year Treasury dropped 6.22% to 0.829% while yield on the 30-year Treasury fell 4.64% to 1.583%.