U.S. stocks closed modestly lower Monday, but off the session lows, extending a slump for equities after all three main benchmarks notched their worst week in about three months amid fears of rising inflation.
How did stock benchmarking trade?
- The Dow Jones Industrial Average DJIA, -0.16% shed 54.34 points to end at 34,327.79, a decline of 0.2%.
- The S&P 500 index SPX, -0.25% fell 10.56 points, or 0.3%, closing at 4,163.29.
- The Nasdaq Composite Index COMP, -0.38% slumped 50.93 points to finish at 13,379.05, a retreat of 0.4%.
On Friday, the Dow, S&P 500 and the Nasdaq Composite Index all logged their steepest weekly losses since Feb. 26, with the Nasdaq also booking its lengthiest weekly losing streak, four straight, since Aug. 23, 2019.
What drove the market?
Stocks ended lower to kick off the week as tech heavyweights saw a fresh round of selling.
“We see guys rotating out of recent winners and going into other areas of the S&P 500, which over the past year or two lagged,” Sahak Maneulian, head of equity trading at Wedbush Securities, told MarketWatch. “But with the reopening, reflation trade, some of those sectors are moving higher at the expense of growth names.”
Apple Inc. AAPL, -0.93%, Facebook Inc. FB, -0.15%, Microsoft Corp. MSFT, -1.20% and Netflix Inc. NFLX, -0.90% shares all ended lower Monday, while the S&P 500 energy section advanced 2.3%.
Optimism around an economic recovery in the U.S. and Europe helped to lift oil futures to a more than two-year high of $66.27 a barrel for June West Texas Intermediate crude CLM21, 0.35%.
Inflation fears also weighed on the market and investors were looking toward Wednesday’s release of minutes from the Federal Reserve’s most recent meeting to help gauge the central bank’s tolerance for pricing pressures in the recovery phase of the COVID pandemic.
“We are going to continue to hyperfocus on inflation for the foreseeable future, because it matters: Inflation and inflation expectations impact consumer behavior, and they impact monetary policy. In the current context, inflation may also impact fiscal policy,” wrote Northern Trust Wealth Management CIO Katie Nixon, in a research report on Monday.
A number of Fed members on Monday described those pressures as likely transitory, even after last Wednesday’s read on consumer inflation came in at its hottest rate since 2008.
Atlanta Fed President Raphael Bostic said Monday in a CNBC interview, that he supports continued easy-monetary policy, and that it will take a “couple of months” to understand the inflation dynamics that are under way as the economy is recovering from the pandemic.
Fed Vice Chairman Richard Clarida said it’s too soon to scale back Fed asset purchases and that he expects higher inflation to be temporary, but that he’s also watching economic data closely.
This comes as nearly one-fourth of adults, in a new Fed survey, said they were worse off financially in the wake of the COVID-19 pandemic. Two-thirds of Black and Hispanic adults said they were doing at least “okay,” compared with 80% of white adults and 84% of Asian adults.
Meanwhile, data in the world’s second-largest economy showed some evidence of China’s sluggish pace of recovery from COVID, reported The Wall Street Journal, citing the National Bureau of Statistics.
The readings come after similar reports for retail sales in the U.S. for April came in flat and a report on U.S. manufacturing output rose 0.7% in April, weaker than economists forecast.
Domestically, equity markets have been underpinned by a brightening outlook for the U.S. economy and corporate earnings, with strategists increasing 2021 earnings estimates at the fastest rate since Donald Trump’s 2018 tax-cut plan prompted a reassessment of the outlook for corporate profits, Bloomberg News reports.
Earnings per share for the S&P 500 has risen 5.7% to $183.90 from $174, according to Bloomberg.
Which companies were in focus?
- Shares of Airbnb Inc. ABNB, -6.16% slumped 6.2% as its post IPO lockup period ends, allowing insiders the right to sell shares.
- AT&T Inc. T and Discovery Communications Inc. DISCA announced a $43 billion deal that will merge AT&T’s WarnerMedia business with Discovery. AT&T shares fell 2.7%, while Discovery declined 5.1%.
- AMC Entertainment Holdings AMC, +7.47% shares rallied 7.5%, marking a winning streak of seven sessions.
- Redbox announced Monday plans to go public through a merger with special-purpose acquisition company, in a deal valuing the new-release movies and home entertainment company at $693 million. Redbox is owned by Apollo Global Management Inc., which it acquired through the purchase of Outerwall in September 2016.
- Shares of Nuvve Holding Corp.NVVE, +30.91% shot up 31% Monday, after the commercial vehicle-to-grid technology company and Stonepeak Partners LP announced plans to form a new joint venture called Levo Mobility LLC to deploy electric vehicle charging for school buses and other commercial EV fleets.
- United Airlines Holdings Inc. UAL, +2.33% said Monday that it is adding more than 400 daily flights to its July schedule and will increase its service to destinations in Europe, as booking for summer travel had more than tripled (up 214%) compared with 2020 levels. Shares rose 2.3%.
- Pizza Hut and Beyond Meat Inc. BYND, -2.34% said Monday that the plant-based meat alternative will be coming to Pizza Hut menus in Edmonton and the Greater Toronto Area. Pizza Hut is part of the Yum Brands Inc. YUM, -0.52% portfolio. Shares of Beyond fell 2.3%, while those for Yum lost 0.5%.
- Hexo Corp. HEXO said Monday it has agreed to acquire 48North Cannabis Corp. NCNNF in an all-stock deal valued at about C$50 million ($41.3 million).
- Curaleaf Holdings Inc. CURLF CURA said Monday it has reached a deal to acquire Los Sueños Farms, the biggest outdoor cannabis grow in Colorado, for $67 million in cash, stock and assumed debt.
How did other assets fare?
- The yield on the 10-year Treasury note TMUBMUSD10Y was unchanged at 1.639%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, a measure of the U.S. currency against a basket of six major rivals, was down 0.2% around 90.18.
- West Texas Intermediate crude for June delivery CL.1, 0.89% closed 90 cents higher, or 1.4%, to settle at $66.27 a barrel on the New York Mercantile Exchange. June gold GCM21 rose $29.50, or 1.6%, settling at $1,867.60 an ounce on Comex, the highest for the metal in more than four months.
- European equities declined, with the Stoxx 600 SXXP ending off less than 0.1% and London’s FTSE 100 UKX retreated 0.2%.
- In Asia, Hong Kong’s Hang Seng Index HSI advanced 0.6%, the Shanghai Composite SHCOMP gained 0.8%. However a rise in COVID cases has led to bearishness in Japan, with its Nikkei 225 NIK falling 0.9% and Taiwan’s TAIEX Y9999 dropping 3%.