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Wall Street ends slightly lower as investors eye inflation clues

Economy May 25, 2021 07:27PM ET
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© Reuters. FILE PHOTO: The front facade of the New York Stock Exchange (NYSE) is seen in New York City, U.S., May 4, 2021. REUTERS/Brendan McDermid/File Photo

By Chuck Mikolajczak

(Reuters) - U.S. stocks closed slightly lower on Tuesday, and each of Wall Street's main indexes failed to stray far from the unchanged mark following a rally in the prior session as investors continue to try and assess the route of inflation.

Yields on longer-dated U.S. Treasuries fell for a fourth straight day, with the benchmark 10-year yield hitting a fresh two-week low of 1.557% and helping to dampen inflation worries. The yield had climbed to as much as 1.776% at the end of March.

Federal Reserve officials continue to downplay rising price pressures, and Fed Vice Chair Richard Clarida said the central bank can take steps to cool a jump in inflation, if it occurs, without derailing the economic rebound coming out of the coronavirus pandemic.

While most market participants expect prices to increase as the economy recovers, concerns about the speed and trajectory of the rise persist.

"Maybe the bond market is not all that far out of balance," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, who says the bond market doesn't seem that concerned about inflation at the moment.

"It's a combination that maybe the Fed is correct but also that the Fed for the first time showed they are beginning to talk about tapering (of bond purchases), which is also a comforting sign that there is still a heartbeat of inflation fighting in the Federal Reserve."

The Dow Jones Industrial Average fell 81.52 points, or 0.24%, to 34,312.46, the S&P 500 lost 8.92 points, or 0.21%, to 4,188.13 and the Nasdaq Composite dropped 4.00 points, or 0.03%, to 13,657.17.

Energy, down 2.04%, was the weakest sector on the day with Exxon Mobil Corp (NYSE:XOM) off 2.26% as the biggest weight on the S&P 500, after sources said BlackRock Inc (NYSE:BLK) has backed several candidates of hedge fund Engine No. 1 to join the energy giant's board.

Real estate, up 0.31% was a bright spot, benefiting from the pause in yields. Data on Tuesday showed sales of new U.S. single-family homes dropped in April as prices surged amid a tight supply of houses, while a separate report showed U.S. consumer confidence was little changed and near last month's number that was the highest reading since February 2020.

The S&P 500 sits about 1% from its May 7 all-time high as the focus turns to the U.S. Personal Consumption Expenditures report, the Fed's preferred measure of inflation, to be released on Thursday. A much stronger than expected reading on consumer prices two weeks ago re-ignited inflation fears and stoked market volatility.

Airline stocks, part of the "reopening" trade, rose after United Airlines and Hawaiian Holdings (NASDAQ:HA) issued upbeat air traffic and ticket sale estimates that sent their shares up 1.50% and 3.59%.

Boeing (NYSE:BA) gained 1.39% after aircraft leasing business SMBC Aviation Capital agreed to buy 14 more 737 MAX jets.

Lordstown Motors Corp slumped 7.45% after the electric vehicle startup said that 2021 production of its Endurance truck would be half of prior expectations and it needs additional capital to execute its plans.

Declining issues outnumbered advancing ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.77-to-1 ratio favored decliners.

The S&P 500 posted 29 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 75 new highs and 51 new lows.

Volume on U.S. exchanges was 9.48 billion shares, compared with the 10.41 billion average for the full session over the last 20 trading days.

Wall Street ends slightly lower as investors eye inflation clues
 

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Comments (7)
Ronald Warren
Ronald Warren May 25, 2021 11:24PM ET
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Powell's solution to inflation. Print more money, so citizens can afford higher priced goods and services.
MAVERICK TRADING
MAVERICKFX May 25, 2021 8:58PM ET
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how long can they still lying about inflation?
Sanjeev Tandon
Sanjeev Tandon May 25, 2021 1:43PM ET
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Copper price will supersed in metal in the future
Mitchel Pioneer
Mitchel Pioneer May 25, 2021 12:21PM ET
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Losses magically vanish, while "rallies" walk an uninterrupted tightrope into the close.  Only in the US Ponzi Scheme, the most fraudulent, criminally manipulated joke of an investment mechanism in history.
Gary Smith
Gary Smith May 25, 2021 12:21PM ET
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You know come companies are reporting near ATH quarters. There is evidence to suggest a very strong and fast recovery. People are buying into this. Housing demand are at ATH too - many different things happening to suggest recovery will be swift.
Vivek Purav
Vivek Purav May 25, 2021 11:42AM ET
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Which Wall Street tick higher? Dow is down
Carrascal Eduardo
Edouard May 25, 2021 10:30AM ET
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It is difficult to understand why the slight rise in inflation, or its decline, would have a greater effect on the price of FAANGs and other high-growth and liquidity-generating technological securities. It would be convenient to separate the imaginary from the real and assess these somewhat stale comments more
Tru Gfu
Tru Gfu May 25, 2021 10:30AM ET
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simply called a multiple...when rates are higher the multiple is lower...it is math based
Tru Gfu
Tru Gfu May 25, 2021 10:30AM ET
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impacts the multiple, at very low interest rates the effect is higher...similar effect on house prices...you can buy more house when rates are lower because the lower interest rate is paid out over 30 years...with stocks, with low rates growth stocks are attractive because your opportunity cost is lower...if rates are 10% how many more decades do you want to wait for Amazon or Tesla to pay a dividend? waiting for that had a higher cost....
Mohd Afzal
Mohd Afzal May 25, 2021 10:30AM ET
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Nice explanation
rohit singh
rohit singh May 25, 2021 10:30AM ET
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higher inflation generally means higher rates to curb it down. a higher rate means a higher discount rate for future earnings of a stock. hence a higher discount rate makes future earnings less into days value, which makes the stock expensive. $10after 1yr, is valued almost same today if interest rate is 0.1% but if interest rate is 2% then the same $10 is equal to $ 8 today. hope i was able to help.
Gary Smith
Gary Smith May 25, 2021 10:30AM ET
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Higher inflation means that higher interest rates will normally cool things down. This increases the cost of capital borrowing to companies, leading to higher interest expenses on the P&L and ultimately less money available then for shareholders. As such, the equity value of a company is likely to be impacted. However, traders tend to over-react to this.  Ditto for consumer spending, as banks may pass loan interest rates on (base of the cost of money + markup = what you and I pay on new loans/credit cards etc).
Jouni Matero
Jouni May 25, 2021 7:25AM ET
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Consumers having less and less buying power but megacap Tech gains is all that matter. Way to go.
 
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