Although the Dow outperformed in the final minutes of Tuesday's session, tech stocks weighed on the market as investors steered clear of growth stocks.
The S&P 500 increased by less than 0.1%, to 2979.39; however, the Nasdaq Composite, which is comprised mostly of tech companies, slipped 3.28 points to 8084.16.
Other indices such as the blue-chip index rose by 0.3%, led by Boeing (NYSE: BA) and Caterpillar (NYSE: CAT).
In particular, software companies and chip-makers were adversely affected. Microsoft (NASDAQ: MSFT) dropped 1.4% and Applied Materials (NASDAQ: AMAT) fell by 1.1%. These companies have been at risk ever since the trade war escalated, because many of the parts involved will be impacted by the tariffs.
Overall, markets are doing well because of the prospect of lower rates and monetary easing. However, given the problem of the zero-lower bound and the case of negative rates in both Japan and Europe, many are questioning whether inflation can actually be created, or in fact, it should be "targeted."
"The major central banks are providing yet another round of monetary easing," Ed Yardeni, president and chief investment strategist at Yardeni Research, wrote in a note Tuesday. "They are doing their best to stimulate their economies and boost inflation closer to their 2.0% targets. However, their ultra-easy monetary policies haven't worked as expected, so they keep doing more of the same."
Trading has thus been relatively quiet this week given investors are awaiting the decisions of policymakers the world over, including the ECB decision on September 12. The ECB is expected to cut 10 basis points on Thursday, while markets have largely priced in 25bps for the Fed cut next week. The cut is likely to come after payrolls disappointed last week.
"The U.S. economy is doing just fine with the consumer very strong, while unemployment is still low," said Thomas Martin, senior portfolio manager at Global Investments. "How central banks act and what their language is will give a clue as to whether or not there's a sustained potential for an economic recovery or whether we're still on the edge with risk to the downside.