U.S. stocks swung between gains and losses on Tuesday as uncertainty about inflation, interest rates and the economy continued to weigh on the market.
All three major indexes opened higher, with the tech-heavy Nasdaq Composite up 2.8% at one point. By late morning, stocks had mostly erased those gains and looked set to extend a steep three-day drop. But as the afternoon wore on, investors turned their attention to Wednesday’s consumer price report and the possibility of inflation peaking – and stocks rebounded again.
The S&P 500 closed up 9.81 points, 0.2%, at 4001.05, a day after the broad index fell 3.2% to its lowest level for the year. The Nasdaq Composite Index climbed 114.42 points, or 1%, to 11737.67.
“The market was taking an overly negative reading of the consumer price index, which led to the afternoon rally,” said Matt Peron, director of research at Janus Henderson Investors.
The Dow Jones Industrial Average fell for a fourth straight trading session, hitting a 52-week low. It closed down 84.96 points, or 0.3%, at 32,160.74.
A cocktail of geopolitical risks and economic headwinds poses the biggest threat to global growth in years and rattles markets. In the US, soaring inflation prompted the Federal Reserve to start raising interest rates and investors fear the move could tip the economy into recession.
Global markets appear equally troubled. In China, the resurgence of Covid-19 outbreaks and Beijing’s tough approach to combating them threatens to rekindle the supply chain bottlenecks that first drove up inflation. In Europe, the war in Ukraine threatens to keep energy prices high and is weighing on growth in the region.
“People came in this morning expecting a relief rally after being hammered for the past few days,” said Joe Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank. “But with inflation in the US, Covid challenges in China and war in Ukraine, we have rarely seen three major catalysts for market action converge.”
Early Tuesday, some investors bought stocks that had been battered by those headwinds.
“Everyone at this point is looking to see if we’ve hit rock bottom,” said Quincy Krosby, chief equity strategist for LPL Financial. “The instinct is that we haven’t hit rock bottom yet.”
Wednesday’s report of new consumer price index data is expected to show inflation rose at a slower pace in April than in the previous month, Krosby said.
Investor sentiment can change by a penny, she added. In January 2019, a speech by Fed Chairman Jerome Powell signaled that the central bank would be patient with rate hikes, reversing a sharp market decline.
The market has entered a new era, Mr. Quinlan said, and investors are more inclined to wait for solid evidence that these challenges have eased before betting stocks have bottomed.
“Investors are very skeptical now,” he said. “They want to see the data. They don’t want to listen to policy makers. All upgrades build scaffolding for the background. But we are not there yet. »
New York Federal Reserve Chairman John Williams said on Tuesday he believed the Fed could achieve a “soft landing” for the U.S. economy while raising rates, even though the jobless rate could rise. .
“By 2023, you will most likely see growth slow down very significantly, and the specter of recessions is really starting to loom,” said Seema Shah, chief strategist at Principal Global Investors..
“What we’re seeing is the realization that it’s going to be very difficult for the Fed to get that soft landing.”
On Tuesday, investors were welcoming signs that the conflict in Ukraine was not escalating and that a planned EU embargo on Russian oil could face delays, Ms Shah said.
Peloton Interactive fell $1.23, or 8.7%, to $12.90 after reporting declining sales and mounting losses as the stationary bike maker struggles with a return to pre-pandemic consumer habits.
Biohaven Pharmaceutical Holding Co.
jumped $56.86, or 68%, to $140 after Pfizer said it would buy the rest of the company for about $11.6 billion.
Duke Realty rose $1.87, or 3.9%, to $49.58 after Prologis said it had made an offer to buy the real estate investment trust for about $23.7 billion. Prologis fell $6.96, or 5.3%, to $125.41.
The yield on the benchmark 10-year Treasury note fell slightly to 2.990% from 3.080% on Monday.
Brent crude fell $3.48, or 3.3%, to $102.46 a barrel. Oil prices had risen in recent months, but fears that China’s lockdowns could sap demand for commodities slowed the rally.
Oil demand in China is expected to rebound strongly as restrictions begin to ease, although the European Union’s proposed ban on Russian oil imports remains an overhang, said Daniel Hynes, senior commodities strategist at ANZ. in Sydney.
“Fundamentals are still very much tilted towards an extremely tight market with risks certainly skewed towards further supply declines over the next three to six months,” Mr Hynes said.
Bitcoin prices fell slightly after a massive sell-off. The world’s largest cryptocurrency was trading at $30,959.99 as of 5 p.m. ET on Tuesday, down 0.4% from $31,075.70 at the same time the previous day.
Overseas, the pancontinental Stoxx Europe 600 index rose 0.7%. In Asia, Japan’s Nikkei 225 closed down 0.6%, the Shanghai Composite rose 1.1% and Hong Kong’s Hang Seng index fell 1.8%.
Corrections & Amplifications
The S&P 500 was previously up 0.7%. An earlier version of this article incorrectly stated that the index was up 07%. Additionally, the S&P 500 closed up 0.2%. An earlier version of this article incorrectly stated that he finished 0.2% lower. (Corrected May 10.)
Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8