The S&P 500 and the Dow Industrials edged lower on Tuesday, as investors worried over warnings of a hit to earnings from the US-China trade dispute and reined in hopes of a steep interest rate cut this month.
In the latest indication of the trade war hurting businesses, German chemicals giant BASF forecast a 30pc fall in its adjusted annual profit, triggering a 1.20pc drop in shares of US chemical companies.
Adding to the downbeat mood, RBC Capital Markets downgraded 3M Co to "sector perform", citing macro pressures from China, auto and electronics sectors. The industrial conglomerate's shares fell 2.6pc and pulled down the S&P industrial sector 0.56pc.
The warnings come as second-quarter earnings season kicks off in earnest next week. Profits at S&P 500 companies are set to dip 0.2pc from a year earlier, according to Refinitiv IBES data.
"Second-quarter earnings are a very important part of the puzzle for investors right now," said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York.
"What has been driving stocks throughout 2019 is optimism about the Federal Reserve's policy and a trade agreement with China, among other things."
Wall Street's main indexes have retreated from their record closing highs after a robust June jobs report on Friday tempered expectations of an aggressive 50 basis point interest rate cut by the Federal Reserve.
Focus this week will be on Fed chief Jerome Powell's remarks at his two-day testimony before the Congress, starting Wednesday. Also due on Wednesday is the central bank's June policy meeting minutes.
On the trade war front, the United States and China are set to relaunch trade talks this week after a two-month hiatus. White House economic adviser Larry Kudlow said discussions with the European Union on a trade pact were also progressing.
At 12:47 p.m. ET, the Dow Jones Industrial Average was down 79.05 points, or 0.29pc, at 26,727.09, and the S&P 500 was down 1.03 points, or 0.03pc, at 2,974.92.
The Nasdaq Composite was up 31.32 points, or 0.39pc, at 8,129.70.
Gains in Amazon.com, Facebook Inc and Netflix kept Nasdaq firmly in the positive territory.
Netflix rose 2pc after Cowen and Co said the video streaming services provider would benefit from high viewership for the recently released third series of its original show "Stranger Things".
Network gear maker Cisco Systems Inc said it would buy Acacia Communications Inc for $2.84 billion in cash, sending the optical component maker's shares 35pc higher.
Declining issues outnumbered advancers for a 1.30-to-1 ratio on the NYSE and for a 1.11-to-1 ratio on the Nasdaq.
The S&P index recorded 17 new 52-week highs and no new low, while the Nasdaq recorded 45 new highs and 40 new lows.
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