Applications to refinance a home loan dropped 0.3% and homebuyer mortgage applications declined 1.6% despite the average fixed 30-year mortgage rate falling one basis point to a fresh record low of 3.00%. The pullback knocked the Dow back into the red for the year.
Equities retreated the day before despite better-than-expected results from major banks Citigroup and JPMorgan, with analysts taking note of executives' insistence that more stimulus is needed for the U.S. economy.
Big Tech companies including Apple and Amazon, whose businesses have been thriving despite the pandemic, led the way higher, while companies that depend more on broad growth in the economy didn't rise as much.
On Monday, the Dow advanced 250.62 points, or 0.9%, to 28,837.52, while the S&P 500 gained 57.09 points, or 1.6%, to 3,534.22, and the Nasdaq Composite led all indexes, with a 296.32 points increase, or 2.6%, to 11,876.26.
"It shows once again that the vaccine is still far away, and it's a good thing that so many pharmaceutical companies are working on it", said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut.
Across the S&P 500, analysts are expecting companies to report another drop in profits for the summer from year-ago levels. The Russell 2000 index of small-cap stocks fell 12.21 points, or 0.7%, to 1,636.85.
The sharpest profit drops for the quarter are expected to come from energy stocks, but the sector rose Wednesday to some of the biggest gains among the 11 that make up the S&P 500 index.
Concho Resources Inc surged 9.7% after a report that oil producer ConocoPhillips was in talks to acquire the shale producer. Apple bounced back from an early slide and eked out a 0.1% gain.
Other airlines and travel-related companies were also weak, and Royal Caribbean dropped 13.2% for the biggest loss in the S&P 500.
The International Monetary Fund, in its latest update, forecast a steep fall in international growth this year as the global economy struggles to recover from the pandemic-induced recession, its worst collapse in almost a century. Its shares rose 0.2 percent.
Aid for the economy from elsewhere in Washington, though, has been harder to come by. Hopes are fading that Congress and the White House can agree on another round of support in the near term.
"The cold reality that markets have refused to countenance is that even if an agreement was reached, its chances of being enacted before the November election are about zero", said Jeffrey Halley of Oanda.
The scale of disruptions in hard-hit economic sectors, notably restaurants, retail stores and airlines, suggests that without an available vaccine and effective drugs to combat the virus, many areas of the economy "face a particularly hard path back to any semblance of normalcy", the International Monetary Fund said. Extra unemployment benefits for laid-off workers and other stimulus that Congress approved in March has already expired. "That really underscores the need for the government to gas the economy".
In European stock markets, the German DAX returned 0.1%, and the French CAC 40 fell 0.1%.