The S&P materials index slid 1.6 per cent while the energy index dipped 1.1 per cent as metals and oil prices dropped after recent gains.
Shares of Supervalu fell nearly 7 per cent after Morgan Stanley told investors to cut holdings in the stock, saying rising food costs will crimp margins. Safeway and Whole Foods Market also slid.
The market’s fall followed a strong start to the new year on Monday and a robust rally through the end of 2010.
The Dow and S&P 500 recently hit two-year highs as economic data pointed to solid US recovery.
“It’s just a bit of a hangover, but no big deal,” said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis.
He tied declines to the pullback in commodities, but he said commodity prices longer term should continue their upward trend.
“With the continuing recovery you’ll need demand for raw materials,” he said.
The Dow Jones industrial average added 20.43 points, or 0.18 per cent, to 11,691.18. The Standard & Poor’s 500 Index slid 1.69 points, or 0.13 per cent, to 1,270.20. The Nasdaq Composite Index dropped 10.27 points, or 0.38 per cent, to 2,681.25 Materials and energy were among top-performing sectors in 2010.
While many analysts see another year of gains for the S&P 500, Morgan Stanley offered a more contrarian view, forecasting a year-end target for the S&P 500 below 2010’s close.
Monday’s move was accompanied by a rise in volume, with more than 7.7bnn shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq – above the 50-day moving average. The pace held strong for a second day, with 3.27bn shares traded near midday.
Shares of Supervalu dropped 6.7 percent to $8.97, while Safeway was down 3.3 per cent at $21.76, and Whole Foods fell 3.5 per cent to $49.00.