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Market Snapshot: U.S. stocks edge lower after economic data as investors await Fed

U.S. stocks edged lower Tuesday, with the S&P 500 and Nasdaq Composite pulling back from record levels, as investors took little notice of economic data, awaiting the kickoff of an eagerly anticipated two-day Federal Reserve policy meeting.

How are stocks benchmarks performing?
  • The Dow Jones Industrial Average
    DJIA,
    -0.37%

    fell 86.31 points, or 0.3%, to 34,307.44.
  • The S&P 500
    SPX,
    -0.16%

    was off 2.31 points, or less than 0.1%, at 4,252.84.
  • The Nasdaq Composite
    COMP,
    -0.32%

    edged down 13.81 points, or 0.1%, to 14,160.33.

On Monday, the Nasdaq rose 104.72 points to close at a record 14,174.14, a gain of 0.7%, marking its first record since April 26, while the S&P 500 index rose 7.71 points, or 0.2%, to market its 29th record closing high of 2021. The Dow fell 85.85 points, or 0.3%, to end at 34,393.75, off 1.1% from its May 7 record at 34,777.76.

What’s driving the market?

The U.S. May producer-price index rose 0.8% in May, pushing prices up 6.6% year over year. Separately, retail sales dropped 1.3% in May.

Also, the New York Fed’s Empire State factory index fell to 17.4 in June from 24.3 a month earlier. Separately, the Federal Reserve said industrial production rebounded 0.8% in May due to a strong gain in auto production.

Markets showed little reaction to the data, with inflation-focused investors fixated on a Fed meeting that hedge-fund manager Paul Tudor Jones referred to as one of the most important central bank meetings of the past four years.

So far the U.S. stock market has been trading as if higher inflation in the recovery phase from the COVID pandemic will be a short-lived phenomenon, caused temporarily by easing of economic restrictions and supply-chain bottlenecks.

The big fear is that the Fed will be forced to scale back its bond-buying program sooner than its initial projections and eventually lay the groundwork for raising benchmark interest rates, which currently stand at a range of 0% to 0.25%.

A survey of global fund managers conducted by Bank of America found that nearly three-quarters of participants think the current spike in consumer prices will recede soon.

However, some prominent financial professionals aren’t so sanguine. On Monday, at a conference, JPMorgan Chase
JPM,
-1.68%

CEO Jamie Dimon said the bank is bracing for the possibility of higher inflation, saying that “if you look at our balance sheet, we have like $500 billion in cash and we’ve actually been stockpiling more and more cash waiting for [an] opportunity to invest in higher rates.”

“But I do expect you are going to see higher rates and more inflation today.”

Separately, Paul Tudor Jones in a CNBC interview Monday morning said that that Fed policy makers are in danger of making a substantial policy mistake by treating rising price pressures as a transitory, or short-lived.

In other U.S. economic data, May industrial production rebounded 0.8% due to a strong gain in auto production. Production of motor vehicles and parts jumped 6.7% in May after a 5.7% drop in the prior month. Capacity utilization rose to 75.2% in May, the highest rate since the pandemic struck last year.

The National Association of Home Builders’ housing market index for June is due out at 10 a.m., at the same time as data on business inventories for April.

Which companies are in focus?
  • AMC Entertainment Holdings
    AMC,
    +10.28%

     stock has more than doubled in the 10 trading days so far in June. Executives and directors of the movie-theater chain have stepped up stock sales to $13 million for the month to date. Shares were up 1.5% on Tuesday.
  • Blucora IncBCOR raised its second-quarter and full-year financial outlook on Tuesday, citing a “much stronger” than anticipated final two weeks of the tax season. Shares rose more than 6%.
  • Sage Therapeutics Inc. SAGE and partner Biogen Inc. BIIB said a Phase 3 study of their major depressive disorder (MDD) treatment met its primary endpoint, as it showed “statistically significant improvement” in symptoms compared with placebo. Sage shares dropped nearly 12%, while Biogen stock was off 0.4%.
  • Shares in aircraft manufacturers Airbus and Boeing were in focus on Tuesday, after news of a settlement of a long-running trade dispute between the European Union and U.S. over state aid to the two groups. Airbus AIR stock rose 0.4% in European trading, while Boeing BA shares were also up 0.4%.
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y rose 1 basis point to 1.51%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was trading near unchanged.
  • Oil futures CL00 advanced, with West Texas Intermediate crude for July delivery up 95 cents, or 1.3%, at $71.83 a barrel. Gold futures GC00 rose 0.1% to $1,867.10 an ounce.
  • European equities were higher, with the pan-Continental Stoxx Europe 600 SXXP up 0.3%. London’s FTSE 100 UKX was trading 0.5% higher.
  • In Asia, the Shanghai Composite SHCOMP closed down 0.9% higher, Hong Kong’s Hang Seng Index HSI ended 0.7% lower and Japan’s Nikkei 225 NIK gained 1%.

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