The S&P 500 lost 0.7% on Wednesday, pulling back for the third straight session after a strong start to the year. With few catalysts to justify further gains, stocks succumbed to some profit taking with shares of energy, health care, and semiconductor companies leading the retreat.

The Dow Jones Industrial Average lost 0.5%, and the Nasdaq Composite lost 0.9%. The Russell 2000 underperformed with a steep loss of 2.0%.

The S&P 500 health care (-1.5%) and energy (-1.3%) sectors were Wednesday's laggards, weighed down by some industry-specific overhangs. Conversely, the materials (+0.2%), utilities (unch), and communication services (unch) sectors outperformed.

Congressional wrangling to rein in drug prices, and health care costs in general, continued to dampen buying interest in health care stocks. Separately, a drop in oil prices following some bearish inventory data released on Wednesday, coupled with the cautious commentary on oil prices from Goldman Sachs on Tuesday, and general growth concerns, continued to foster a risk-off sentiment in energy stocks.

On a related note, the OECD cutting its global GDP growth forecast for 2019 to 3.3% from 3.5%, New York Fed President Jon Williams (FOMC voter) suggesting a "new normal" of slow growth on the order of 2% will keep the Fed patient, and the Fed's Beige Book, which reported slight-to-moderate growth for 10 of the 12 Fed districts, contributed to the slowdown narrative that drove some profit taking.

Semiconductor stocks underperformed in today's trade, dragging on the heavily-weighted S&P 500 information technology sector (-0.6%). Micron (MU 37.93, -2.06, -5.2%) was a notable laggard after Cleveland Research lowered its revenue estimates citing increased pricing headwinds, inventory risk and soft demand.

The Philadelphia Semiconductor Index lost 1.7%, although the group was already up 17.5% this year heading into the session.

General Electric (GE 9.11, -0.78) dropped 7.9%, extending losses from Tuesday that resulted from the company's negative outlook for industrial free cash flow in 2019. A disparaging view on the stock's prospects from highly-respected JPMorgan analyst Stephen Tusa, who said his $6 price target looks generous, weighed heavily.

On the other hand, shares of Dollar Tree (DLTR 100.35, +4.88, +5.1%) and Abercrombie & Fitch (ANF 25.70, +4.35, +20.4%) outperformed after the companies pleased investors with their earnings reports.

U.S. Treasuries saw increased buying interest, sending yields lower across the curve. The 2-yr yield declined four basis points to 2.51%, and the 10-yr yield declined three basis points to 2.69%. The U.S. Dollar Index finished flat at 96.86. WTI crude lost 0.5% to $56.25/bbl.

Reviewing Wednesday's economic data, which included the Trade Balance Report for December, ADP Employment Change for February, the Fed's Beige Book for March, and the weekly MBA Mortgage Applications Index:

• For December, the trade deficit widened to $59.8 billion (Briefing.com consensus -$57.8 billion) from a downwardly revised $50.3 billion (from -$49.3 billion) in November. The December deficit is the widest since October 2008 when the world was in the throes of the worst financial crisis since the Great Depression.
  • The key takeaway from the report is that it will fuel the Trump Administration's fire to correct the trade imbalance with assertive policy actions.
• The ADP National Employment Report showed an increase of 183,000 in February (Briefing.com consensus 175,000), and the January reading was revised to 300,000 (from 213,000).
• The Federal Reserve's Beige Book for March noted that ten Fed Districts reported slight-to-moderate growth while Philadelphia and St. Louis reported flat economic conditions. Consumer spending activity was described as mixed. Lower retail and auto sales were attributed to harsh winter weather and a higher cost of credit. Overall manufacturing activity increased while activity in the nonfinancial services sector increased at a modest-to-moderate pace.
• The weekly MBA Mortgage Applications Index decreased 2.5% following a 5.3% increase in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report, revised fourth quarter unit labor costs and nonfarm productivity, and the Consumer Credit report for January on Thursday.

• Russell 2000 +14.0% YTD
• Nasdaq Composite +13.1% YTD
• S&P 500 +10.6% YTD
• Dow Jones Industrial Average +10.1% YTD