The S&P 500 dropped for the third time in four sessions on Wednesday, losing 0.3%, as technology and consumer discretionary shares weighed, overpowering gains most elsewhere. The tech-heavy Nasdaq showed relative weakness, tumbling 1.2%, while the blue-chip Dow outperformed, tacking on 0.1%.

Facebook's (FB 167.18, -3.98) COO, Sheryl Sandberg, and Twitter's (TWTR 32.73, -2.11) CEO, Jack Dorsey, testified before the Senate Intelligence Committee on Wednesday morning, defending their efforts to prevent election meddling. Mr. Dorsey also appeared before the House Energy and Commerce Committee in the afternoon, rebuking allegations that Twitter promotes certain political ideologies.

The hearings didn't produce any new information of note, but that didn't prevent Facebook and Twitter shares from tumbling 2.3% and 6.1%, respectively.

Those losses coincided with a broad tech retreat that forced the top-weighted information technology sector to the bottom of the sector standings. The tech space, which represents a quarter of the broader market alone, lost 1.5%, overshadowing gains from eight of the other ten groups. The consumer discretionary space similarly lost 1.1%, with Amazon (AMZN 1994.82, -44.69) dropping 2.2%.

Given the underperformance of information technology and consumer discretionary, which are by far the best-performing sectors year-to-date, and the relatively flat performance of U.S. Treasuries, with the benchmark 10-yr yield closing unchanged at 2.90%, Wednesday's outing appeared to be nothing more than a natural pullback following Wall Street's latest run to new record highs.

On the upside, countercyclical sectors outperformed, with consumer staples and utilities closing atop the sector standings with respective gains of 1.2% and 1.3%. The lightly-weighted telecom services sector (+0.8%) was the next-best performing group, and the trade-sensitive industrial sector (+0.6%) also showed relative strength.

In Washington, trade talks between the U.S. and Canada quietly resumed on Wednesday, producing no new headlines of note. Meanwhile, investors looked ahead to Thursday when the White House could announce its decision regarding another round of tariffs -- this one targeting $200 billion worth of Chinese goods.

Elsewhere, West Texas Intermediate crude futures tumbled 1.5% to $68.75/bbl, hitting their lowest level in a week, after a weaker-than-expected Tropical Storm Gordon hit the Gulf Coast overnight, doing less to disrupt crude production than anticipated. The oil-sensitive energy sector finished with a loss of 0.1%.

Reviewing Wednesday's economic data, which was limited to the July Trade Balance and the weekly MBA Mortgage Applications Index:

• The July trade balance report showed a deficit of $50.1 billion (Briefing.com consensus -$50.6 billion). The June deficit was revised to $45.7 billion from $46.3 billion.
  • The key takeaway from the report is twofold: (1) the widening deficit will create a drag on Q3 GDP growth and (2) the July report is going to fan the Trump Administration's flames about trade matters as it showed an increase in the deficit with both the European Union and China.
• The weekly MBA Mortgage Applications Index slipped 0.1% to follow last week's decrease of 1.7%.

Looking ahead, investors will receive several pieces of economic data on Thursday, including the August ADP Employment Change report, the revised readings for Q2 Productivity and Unit Labor Costs, the weekly Initial Claims report, July Factory Orders, and the August ISM Services Index.

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