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S&P 500, Nasdaq dragged by tech as upbeat data fans inflation fears

Stock MarketsJun 03, 2021 06:31PM ET
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2/2 © Reuters. FILE PHOTO: The New York Stock Exchange is pictured in the Manhattan borough of New York City, New York, U.S., April 16, 2021. REUTERS/Carlo Allegri/File Photo 2/2

By Lewis Krauskopf, Shashank Nayar and Medha Singh

(Reuters) - U.S. stocks ended lower on Thursday, with tech shares dragging on the S&P 500 and Nasdaq, as investors balanced concerns about inflation and the Federal Reserve reining in stimulus with relief about corporate tax hikes.

The Dow posted a slight loss after five sessions of gains. Stocks rebounded somewhat after reports that President Joe Biden offered to scrap his proposed tax hike. In talks with Republicans, the Democrat offered to drop plans to hike corporate rates as high as 28%, and instead set a 15% minimum tax rate for companies, sources told Reuters.

A better-than-expected U.S. weekly unemployment report and private payrolls numbers for May pointed to strengthening labor conditions, ahead of the closely watched U.S. payrolls report due on Friday. A measure of service sector activity increased to a record high.

Investors are focused on whether robust economic reports could prompt the Fed to pare back monetary support put in place during the coronavirus pandemic sooner than expected.

"The market is digesting strong economic data with some inflationary pressures and factoring in whether this will change the timing of Fed tapering and how to factor that into stock prices," said Brad Neuman, director of market strategy at Alger in New York.

Sparking fears over easing support was the Fed's announcement on Wednesday that it will begin to unwind its corporate bond holdings acquired last year through an emergency lending facility launched to calm credit markets at the height of the pandemic.

The Dow Jones Industrial Average fell 23.34 points, or 0.07%, to 34,577.04; the S&P 500 lost 15.27 points, or 0.36%, at 4,192.85; and the Nasdaq Composite dropped 141.82 points, or 1.03%, to 13,614.51.

The heavyweight S&P 500 tech sector fell 0.9%. Tech and other growth stocks are seen as particularly vulnerable if inflation drives up bond yields and more heavily discounts the value of future cash flows.

"Higher rates and inflation are kind of the package deal that investors are watching right now," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "If you have rising inflation, rising interest rates, they are going to be especially harmful to growth stocks."

The energy sector rose 0.3% and financials gained 0.2%. Those and other value stock segments that are expected to outperform in an expanding economy have topped tech and other growth shares for much of 2021.

Overall, the S&P 500 is up 11.6% for the year and within about 1% of its record high.

In company news, General Motors Co (NYSE:GM) shares rose 6.4%, after the carmaker estimated "significantly better" first-half profits than previously forecast. Rival Ford added 7.2%.

Frenzied trading continued in retail investor favorite AMC Entertainment (NYSE:AMC) Holdings. After big swings, AMC shares ended down 17.9% after the theater chain operator said it completed a share offering it announced earlier in the day.

Declining issues outnumbered advancers on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.

The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 93 new highs and 31 new lows.

About 12.5 billion shares changed hands in U.S. exchanges, above the roughly 10.8 billion daily average over the last 20 sessions.

S&P 500, Nasdaq dragged by tech as upbeat data fans inflation fears
 

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Comments (8)
Mitchel Pioneer
Mitchel Pioneer Jun 03, 2021 1:24PM ET
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Another classic display of criminal intervention.  The DOW magically "recovers" as "buyers" rush in, only to stop buying the second it goes green.  Now it's miraculously holding above break-even.  Flagrantly manipulated joke.  The S&P follows, and the classic 45 degree "recovery" of losses is unfolding on the NASDAQ as well.  Can't have a loss in the biggest investment joke in history, now can we?
Kristof Naessens
Kristof Naessens Jun 03, 2021 11:54AM ET
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So Russia dumps all dollar holdings, inflation is soaring. Effect is the dollar is getting stronger and precious metals selling off! Looks perfectly normal!!!
Red Maple
Red Maple Jun 03, 2021 11:54AM ET
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and the dollar is rising today
Beavis Bombay
Beavis Bombay Jun 03, 2021 11:46AM ET
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Expect a 1000 plus points fall in the DOW soon
Mitchel Pioneer
Mitchel Pioneer Jun 03, 2021 11:35AM ET
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Another miracle recovery for the laughingstock of the financial world.
Bett Albern
Bett Albern Jun 03, 2021 11:24AM ET
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The Administration is not telling the truth.  Inflation is here in full force but they can not acknowledge it because they will not be able to push through Massive spending and Socialist agendas.
Lurking Lurker
Lurking Lurker Jun 03, 2021 11:24AM ET
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I don't see how the administration needs to explicitly state inflation is here when you have business news outlets saying it. Also, Covid put a halt to moving commodities last year and what we're seeing now, a year later, is global demand increase for certain commodities leading to the inflation
Tm Ho
Tm Ho Jun 03, 2021 11:24AM ET
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Lurking Lurker  I don't think this can simply be attributed to demand side inflation. There is some of it sure, but the stimulus and increased money supply is a far greater effect.
Nazgul Undead
Nazgul Undead Jun 03, 2021 11:24AM ET
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Tm Ho one telling news is many countries like UK, Canada and Australia are already raising interest rates and they haven't gone nearly full throttle on stimulus pumping as the US did. Seems like US is lagging behind other Feds on tapering.
Lex Wild
Lex Wild Jun 03, 2021 11:01AM ET
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It's a trap just buy ;-)
Mark Jannetty
Mark Jannetty Jun 03, 2021 10:06AM ET
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such a pretty shade of red
Stan Smith
Stan Smith Jun 03, 2021 9:55AM ET
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Um...stocks are plunging ...Russia just dumped the USD...Relevant News please
 
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