Stocks hugged the flat line Wednesday afternoon on the heels of a mixed session a day earlier, with the three major indexes struggling for direction at the start of June.
The three major indexes fluctuated between small gains and losses. Brent and West Texas intermediate crude oil prices extended gains after hitting their highest levels since 2018 on Tuesday after OPEC+ suggested demand would rebound during the recovery and opted for gradual supply increases. Treasury yields fell.
Shares of Zoom Video Communications (ZM) jumped after the company’s first-quarter earnings and current-quarter guidance topped estimates, helping alleviate concerns over a growth slowdown for the software company as more in-person activities resume. Meanwhile, “meme stock” AMC Entertainment Holdings (AMC) rallied by more than 125% to a record intraday high as social media interest in the stock resurged.
Investors this week digested more mixed data report on the U.S. economic recovery, with still more signs of supply-side disruptions emerging. On Tuesday, the Institute of Supply Management’s headline index of manufacturing sector activity topped estimates, but the report also showed that labor shortages contributed to rising prices and capped production. The Labor Department’s May jobs report on Friday is set to offer another look at the pace of re-hiring last month and the employment gaps still left to be filled following the pandemic.
But as jitters over rising inflation remain top of mind for many investors, some strategists suggested markets’ reactions to recent economic data have been overblown, given the likelihood that many of these rising prices will prove transitory.
“Overall, a lot of the fears of inflation that are going on in the markets right now are more than necessary. Investors have just been a little bit more fearful than necessary at this time,” Josh Kutin, Columbia Threadneedle Investments North America head of asset allocation, told Yahoo Finance. “That said, we have experienced some pretty serious reactions to it, even that big CPI [consumer price index] print we saw a couple weeks ago did surprise investors. And if we see something similar like that in that jobs report, that could create a little bit of a short-term blip.”
Others also suggested that investors could be in for further choppiness in trading in the near-term.
“We’ve had such a run-up since the lows of the pandemic that now, I think we’re going to see a summer that’s a bumpy ride,” Loreen Gilbert, WealthWise Financial chief executive officer, told Yahoo Finance. “And it’s an opportunity for investors to go in as we see declines, because we do expect that we’re in a bull market run that’s going to continue.”
12:30 p.m. ET: ‘If you’re a believer in inflation, you really want to play those cyclical areas of the market’: Strategist
Cyclical stocks have so far strongly outperformed so far for the year-to-date with the economic recovery under way. The energy and financials sectors have risen 45% and 29%, respectively, in the S&P 500, compared to the broader market’s just 12% increase.
Even given this run of outperformance, these cyclical and value areas of the market may still be the best place for investor opportunity, especially as inflation expectations mount.
“Value stocks as a whole—cyclical stocks as a whole, are very, very undervalued compared to growth stocks,” David Wagner, Aptus Capital Advisors portfolio manager and analyst, told Yahoo Finance. “If you’re a believer in inflation, you really want to play to those cyclical areas of the market.”
12:06 p.m. ET: ‘It may be time to at least think about thinking about tapering,’ Fed’s Harker says
Philadelphia Federal Reserve President Patrick Harker said Wednesday that as the economic recovery continues, it may not be time for the Federal Reserve to “at least think about thinking about tapering” its quantitative easing program.
“We’re planning to keep the federal funds rate low for long, but it may be time to at least think about thinking about tapering our $120 billion in monthly Treasury bond and mortgage-backed securities purchases,” he said in prepared remarks for a Women in Housing and Finance Public Policy Luncheon.
“This is not something we are going to do suddenly, though,” he added. “We need to follow the playbook we had after the Great Recession; that is, start to taper the bond purchases slowly. We will remove accommodation carefully and methodically as the economy continues to strengthen.”
11:15 a.m. ET: Schlumberger, oil stocks gain after delivering upbeat outlook, with business on the ‘verge of an exceptional growth cycle’
Energy shares rose after Schlumberger CEO Olivier Le Peuch offered a strong outlook for the company during a presentation Wednesday as oil demand begins to pick back up during the recovery.
“In the context of the growing economic rebound, this upcoming industry cycle can potentially be characterized as a super cycle,” he said in prepared remarks at Bernstein’s Strategic Decisions Conference. “It will be broad-based, across geographies and operational environments—land, offshore, North America, and particularly international markets—and it occurs at a pivotal time of digital transformation and energy transition.”
“With oil demand projected to reach pre-2019 levels by the end of 2022 and supply tightening, our oil and gas business is on the verge of an exceptional growth cycle,” he added. “Given our unique position and strategy, we are positioned to deliver outstanding returns in the short and medium term.”
Shares of Schlumberger (SLB) gained more than 3.5% intraday following the remarks. The stock has so far risen 56% for the year-to-date. Exxon Mobil (XOM) and Chevron (CVX) also advanced, and the energy sector outperformed in the S&P 500.
9:30 a.m. ET: Stocks open slightly higher
Here’s where markets were trading after the opening bell:
S&P 500 (^GSPC): -2.04 (-0.05%) to 4,202.07
Dow (^DJI): +46.25 (+0.13%) to 34,575.70
Nasdaq (^IXIC): -12.26 (-0.09%) to 13,736.48
Crude (CL=F): +$1.63 (+2.46%) to $67.95 a barrel
Gold (GC=F): +$2.30 (+0.12%) to $1,902.50 per ounce
10-year Treasury (^TNX): -1.9 bps to yield 1.596%
7:44 a.m. ET: AMC shares add another 21% in early trading despite report that hedge fund sold its stake
Shares of AMC Entertainment Holdings (AMC) were on track to rally for another session even after Mudrick Capital Management reportedly sold its entire stake in AMC, with investors on Reddit looking past the sale and pushing the stock still higher.
Bloomberg reported Tuesday that Mudrick Capital no longer holds any shares in AMC and sold its shares at a profit, citing an unnamed person familiar with the matter. The report came on the same day the movie theater company announced it sold $230.5 million worth of shares to the hedge fund.
AMC shares were on track to add to a jump of 22.7% from Tuesday’s trading day. Shares have surged 220% over the last month.
7:20 a.m. ET Wednesday: Stock futures tick slightly higher
Here’s where markets were trading Wednesday morning:
S&P 500 futures (ES=F): 4,200.75, +2.25 points (+0.05%)
Dow futures (YM=F): 34,597.00, +48.00 points (+0.14%)
Nasdaq futures (NQ=F): 13,651.25, +2.5 points (+0.02%)
Crude (CL=F): +$0.68 (+1.00%) to $68.40 a barrel
Gold (GC=F): -$6.90 (-0.36%) to $1,898.10 per ounce
10-year Treasury (^TNX): -1 bp to yield 1.605%
6:24 p.m. ET Tuesday: Stock futures edge lower
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): 4,195.5, -3 points (-0.07%)
Dow futures (YM=F): 34,523.00, -27 points (-0.08%)
Nasdaq futures (NQ=F): 13,639.50, -9.25 points (-0.07%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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