The Dow Jones Industrial Average booked a modest loss Monday, after briefly surpassing its all-time closing high, while the Nasdaq Composite and small-cap Russell 2000 index finished higher as investors awaited more data on the next leg of the economic recovery.
How did major indexes perform?
- The Dow Jones Industrial Average shed 126.15 points, or 0.4%, to close at 34,630.24, after rising above its May 7 all-time closing high at 34,777.76 early in the session.
- The S&P 500 index fell 3.37 points to end at 4,226.52, down 0.1%, but not far off its record close at 4,232.60, also put in on May 7.
- The Nasdaq Composite Index rose 67.23 points, or 0.5%, to finish at 13,881.72.
- The Russell 2000 index of small-cap stocks rose 1.4% to end at 2,319.18.
Losses on the S&P 500 were led by a 1.2% decline in materials shares and a 0.6% fall in those for financials
On Friday, stocks rose following a May jobs report that came in below expectations but showed a pickup in job creation from April. The Dow rose 0.7% for the week, while the S&P 500 gained 0.6% and the Nasdaq Composite advanced 0.5%.
What drove the market?
Stock indexes ended mixed, with the tech-heavy Nasdaq Composite and small-cap Russell 2000 booking gains, as investors looked forward to the release of May inflation data on Thursday to help gauge pricing pressures building up during the most recent leg of the U.S. economic recovery.
“You’ve got a handful of stocks going berserk, but the rest of the market has been seeing a very slow grind higher,” said Sahak Manuelian, head of equity trading at Wedbush Securities, adding that the summer doldrums appear to be setting in after Friday’s rally.
Shares of AMC Entertainment Holdings Inc. closed 14.8% higher Monday, but off the session’s best levels, while those of GameStop Corp. rose 12.7%.
“In some areas, we are seeing the reflation trade stocks are giving back a little bit,” Manuelian told MarketWatch, while pointing to Monday’s pullback in shares in the materials and industrials sectors.
Investors have been grappling with concerns about the potential for out-of-control inflation, while also weighing the prospects of a major infrastructure plan that may further stimulate economic growth in the rebound from COVID.
“I think we are in a push-pull market,” said Joe Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank in an interview with MarketWatch, adding that stocks indexes are consolidating near all-time highs, but that U.S. companies also are expected to deliver another strong round of earnings in the second-quarter.
“We are treading water, but nicely at these elevated levels,” he said.
Treasury Secretary Janet Yellen said in an interview Sunday that it would be OK if President Joe Biden’s $4 trillion spending plans lift inflation and lead to higher rates.
“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” she told Bloomberg. “We want them to go back to” a normal environment, “and if this helps a little bit to alleviate things then that’s not a bad thing — that’s a good thing.”
Investors also have been focused on signs of a slower pace of recovery for the U.S. labor market, after May’s employment report fell short of some Wall Street estimates, even as employers across the economy report difficulties attracting workers to fill vacant spots.
“Economic data have been erratic, and we expect more of the same as economies restart amid pent-up consumer demand and supply shortages,” wrote a team led by Elga Bartsch, head of macro research at the BlackRock Investment Institute, in a Monday note.
“We advocate looking through near-term market volatility and remain pro-risk, predicated on our belief that the Fed faces a very high bar to change its easy monetary policy stance,” she said.
Quinlan said he expects economic data surprises to become “less surprising in the future” and sees signs that markets already may be pricing in a future without full-blown support from the Federal Reserve, including the eventual tapering of its $120 billion-a-month bond buying program.
On Thursday, the May consumer-price index is scheduled for release, which will offer the latest picture on pricing pressures. A jump in the April reading last month rattled investors last month.
Meanwhile, the Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15%, a move designed to deter multinational companies from avoiding taxes by stashing profit in low-rate countries. The plan must overcome hurdles to implementation, however, including a divided U.S. Congress.
Biden and Sen. Shelley Moore Capito, R-W.Va., were set to meet again Monday or Tuesday in an attempt to reach a bipartisan agreement on infrastructure spending. Biden on Friday rejected an offer by Capito to add around $50 billion to Senate Republicans’ $928 billion plan. Biden, who last week cut the size of his infrastructure proposal to $1.7 trillion, told the lawmaker he wants at least $1 trillion in new spending over current levels versus $250 billion in the Republican plan, according to reports.
Which companies were in focus?
- Facebook Inc. stock rallied 1.9% Monday, ending at a record and touching an intraday high, as a couple of analysts said the social media platform’s new two-year ban on former President Donald Trump likely won’t carry any financial consequences.
- Eli Lilly and Company shares rose 10.2% on an up day for biotech stocks.
- Biogen Inc. shares surged 38.3% after the Food and Drug Administration approved its Alzheimer’s drug, providing a boost to shares of other biotechs.
- Shares of Amazon.com Inc. fell 0.3% after founder Jeff Bezos said he would be one of the first passengers on his Blue Origin space-travel company’s New Shepard spacecraft.
- Tesla Inc. will pull the plug on its Model S Plaid Plus electric car, Chief Executive Elon Musk said Sunday, because the regular Plaid is “so good.” Tesla shares rose 1%.
- A group of private-equity firms reached a deal to acquire Medline Industries Inc. that would value the medical-supply company at more than $30 billion, in one of the largest leveraged buyouts since the financial crisis. Medline said Saturday that Blackstone Group Inc. Carlyle Group Inc. and Hellman & Friedman LLC had reached a deal to take a majority stake in the company.
- Apple Inc.’s annual Worldwide Developers Conference, or WWDC, kicked off Monday with the company touting forthcoming upgrades that will make FaceTime a more formidable contender in the videoconferencing world. Apple awaits a ruling on a lawsuit brought by Epic Games, the maker of the popular “Fortnite” game. Shares of Apple ended unchanged.
How did other assets fare?
- The yield on the 10-year U.S. Treasury note TMUBMUSD10Y was up 1.1 basis point at 1.570%, compared with 1.56% on Friday at 3 p.m. Eastern Time.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was down 0.2%.
- Oil futures CL00 closed slightly lower, with West Texas Intermediate crude for July delivery off 39 cents, or 0.6%, to settle at $69.23 a barrel. Gold futures GC00 for August delivery climbed by $6.80, or 0.4%, to settle at $1,898.80 an ounce.
- In European equities trading, the pan-Continental Stoxx Europe 600 SXXP rose 0.2% to close at a record 453.56. London’s FTSE 100 UKX rose 0.1%.
- In Asia, the Shanghai Composite added 0.2%, while the Hang Seng Index slipped 0.5%; Japan’s Nikkei 225 rose 0.3%.
—William Watts contributed reporting