The S&P 500 lost 0.1% on Tuesday in a session that saw little conviction from buyers or sellers. Encouraging economic data and solid earnings reports from Target (TGT 76.00, +3.33, +4.6%) and Kohl's (KSS 71.33, +4.86, +7.3%) provided some support for the market.

The Dow Jones Industrial Average lost 0.1%, and the Nasdaq Composite finished flat. The Russell 2000, meanwhile, underperformed with a loss of 0.5%.

The S&P 500 industrials (-0.6%) and materials (-0.3%) sectors underperformed the broader market. Conversely, the communication services (+0.7%), real estate (+0.3%), and consumer discretionary (+0.2%) sectors were the lone groups to finish with gains.

Stocks opened roughly flat amid lingering concerns about the U.S. striking, and enforcing, a meaningful trade deal with China. On a related note, China lowered its 2019 GDP growth forecast to 6.0%-6.5% from 6.5%, and announced some tax cuts in a bid to contend with a "tough economic battle ahead."

The S&P 500 dropped 0.4% in early action but selling efforts were tempered following the release of the stronger-than-expected New Home Sales report for December and the ISM Non-Manufacturing Index for February.

The more recent ISM Non-Manufacturing Index, which included a sizable increase for the New Orders component, helped dampen the recession narrative that has picked up amid a mixed slate of economic data.

At the same time, better-than-expected earnings results and guidance from Target and Kohl's helped keep investors at ease. Their solid results helped spur gains in the SPDR S&P Retail ETF (XRT 45.65, +0.37, +0.8%) and the S&P 500 consumer discretionary sector (+0.2%).

General Electric (GE 9.89, -0.49) for its part lost 4.7% after CEO Larry Culp said the company's industrial free cash flow will be negative in 2019.

There was also some M&A speculation within the insurance industry. Aon (AON 157.25, -13.38, -7.8%) confirmed it is in the early stages of considering an all-share business combination with Willis Towers Watson (WLTW 182.04, +8.99, +5.2%).

The U.S. Treasury market was relatively muted on Tuesday. The 2-yr yield increased one basis point to 2.55%, and the 10-yr yield was unchanged at 2.72%. The U.S. Dollar Index increased 0.2% to 96.84. WTI crude was unchanged at $56.54/bbl.

Reviewing Tuesday's economic data, which included the ISM Non-Manufacturing Index for February, New Home Sales for December, and the Treasury Budget for January:

• The ISM Non-Manufacturing Index increased to 59.7 in February (Briefing.com consensus 57.2) from 56.7 in January. The dividing line between expansion and contraction is 50.0, so the increase in February reflects an acceleration in business activity in the non-manufacturing sector.
  • The key takeaway from the report is that it featured a sizable increase for the New Orders component, which is a positive marker that will help push out the recession narrative for the U.S. economy since the non-manufacturing sector accounts for a much larger chunk of economic activity than the manufacturing sector does.
• New home sales increased 3.7% month-over-month to a seasonally adjusted annual rate of 621,000 (Briefing.com consensus 572,000) from a downwardly revised 599,000 (from 657,000) in November.
  • The key takeaway from the report is that the improvement in new home sales coincided with a drop in both median and average selling prices. Another important takeaway is that lower-priced homes (less than $400,000) accounted for a much smaller percentage of total homes sold than in November, underscoring the point that there are supply constraints at more affordable price points.
• The Treasury Budget for January showed a surplus of $8.7 billion versus a surplus of $49.2 billion for the same period a year ago. The Treasury Budget data is not seasonally adjusted, so the January surplus cannot be compared to the $13.5 billion deficit for December.
  • The fiscal year-to-date deficit is $310.5 billion versus a deficit of $175.7 billion for the same period a year ago. The budget deficit over the last 12 months is $913.5 billion.

Looking ahead, investors will receive the ADP Employment Change for February, the weekly MBA Mortgage Applications Index, the Trade Balance Report for December, and the Fed's Beige Book for March on Wednesday.

• Russell 2000 +16.3% YTD
• Nasdaq Composite +14.2% YTD
• S&P 500 +11.3% YTD
• Dow Jones Industrial Average +10.6% YTD