Stocks fell on Monday, resuming last week's declines as investors' concerns around rising inflation persisted.
The Dow was off by about 0.2% by market close, and the S&P 500 also declined. The Nasdaq extended losses after the index fell for a fourth straight week last week, as technology and growth stocks gave back more gains amid jitters over rising rates.
Bitcoin prices (BTC-USD) fell to sink below $45,000 even after Tesla CEO Elon Musk said the company had not sold any of its holdings of the cryptocurrency, after an earlier Twitter exchange appeared to imply an intent to sell.
Stocks are coming into this week on the heels of a choppy period of trading last week, which saw the three major indexes pull back sharply as new data on consumer and producer price changes came in higher than expected. Supply chain bottlenecks across industries have weighed on producers' abilities to keep up with surging demand as the economy emerges from the pandemic, stoking concerns of even higher prices. And new FactSet data showed the most companies have cited "inflation" on their latest quarterly earnings calls since at least 2010.
Investors have also been closely watching these trends to gauge whether the Federal Reserve might step in soon to curb rising inflation by rolling back the policies that undergirded the economy during the pandemic, including conducting $120 billion per month in asset purchases and maintaining near-zero interest rates. Still, policymakers including Federal Reserve Chair Jerome Powell have suggested they believe near-term advances in prices will prove transitory and attenuate in the coming months.
"I think what we're seeing as a trend is that we know eventually, there's going to be a tapering of purchases by the Fed and we're going to start hearing that. And I would expect that to happen sooner [rather than] later as we have these inflation concerns," Loreen Gilbert, WealthWise Financial CEO, told Yahoo Finance. "I would expect some volatility in the markets over the next few months as we're in this transitory time of figuring out where are we going."
Meanwhile, a stronger-than-expected corporate earnings season continues this week with retailers including Target (TGT), Walmart (WMT), Home Depot (HD) and Lowe's (LOW) poised to report results. Last week's retail sales data showed an unchanged print on consumer spending across the economy in April over the prior month, pointing to a slowdown after a stimulus-boosted surge in March.
While the vast majority of S&P 500 companies that have reported earnings results so far have handily exceeded estimates, these beats have not been rewarded by a commensurate stock pop, many analysts have noted. These muted responses may also be a signal of investors' hesitancy after already pricing in the strength of the post-pandemic recovery.
"Investor and equity analyst reactions to earnings results reveal skepticism that 1Q beats provide a reason for additional forward looking optimism," Goldman Sachs analyst David Kostin wrote in a note Monday. "Firms that beat EPS [earnings per share] estimates typically outperform the S&P 500 by 100bp the day after reporting. However, the typical stock that beat on EPS this quarter outperformed by just 51 bp, continuing the trend from 2020."
4:04 p.m. ET: Stocks extend last week’s declines, led by drop in technology stocks; Nasdaq sheds 0.4%
Here were the main moves in markets as of 4:04 p.m. ET:
S&P 500 (^GSPC): -10.56 (-0.25%) to 4,163.29
Dow (^DJI): -54.34 (-0.16%) to 34,327.79
Nasdaq (^IXIC): -50.93 (-0.38%) to 13,379.05
Crude (CL=F): +$0.95 (+1.45%) to $66.32 a barrel
Gold (GC=F): +$28.50 (+1.55%) to $1,866.60 per ounce
10-year Treasury (^TNX): +0.5 bps to yield 1.6400%
12:24 p.m. ET: Latest economic data shows 'supply-side shocks hitting the economy,' but these will likely resolve in months to quarters: Economist
The most recent sets of economic data have reflected an economy in the process of a "violent recovery" following the worst points of the pandemic last year, generating some inflationary pressures and likely weighing on high growth stocks in the near-term, according to at least one strategist.
"What we had with the last jobs report was a pretty good bump in wages month over month but weak job growth. And so, that does speak to some of these supply-side shocks hitting the economy," MKM Partners Chief Economist and Market Strategist Michael Darda told Yahoo Finance. "The last jobs report showed the U.S. economy gained 266,000 jobs in April, or well below the 1 million job gains expected. "I think a lot of those are going to self-resolve over the course of the months and quarters ahead."
"There is some inflationary pressure. But that also followed deflationary pressure in the CPI about a year ago," he added. "So one way to cut through the noise is to just look at where these data points are – whether it's jobs, GDP or inflation – relative to the pre-COVID trend growth path. Because we had a huge collapse, now we've had a violent recovery."
"We've seen the economy is in a V-shaped recovery but we still have a lot of jobs to make up. Inflation is moving up now but it's a little less than 1% above its pre-COVID trend growth path. So we'll see where the rest of the year plays out," he said. "We're pretty optimistic on the economy. We're a little more cautious on risk markets particularly the Nasdaq, and what would be represented by high valuation growth stocks. I think in this environment with valuations up where they are, there's some real risk there."
10:08 a.m. ET: Homebuilder confidence unchanged in May, matching estimates and holding at elevated level
A closely watched measure of homebuilder confidence was unchanged between April and May, even as concerns over tight inventory, rising home prices and building material shortages began to emerge in the housing market and threatened to weigh on activity.
The National Association of Home Builders' housing market index was unchanged at a print of 83 in May, matching consensus estimates, according to Bloomberg data. This marked the highest reading since February. Readings above 50 suggest more builders assess conditions to be strong than weak.
9:45 a.m. ET: AT&T shares jump after announcing it will spin off, combine WarnerMedia with Discovery's media assets
Shares of AT&T (T) jumped after the opening bell Monday morning after the telecommunications giant announced it planned to spin off its media division WarnerMedia and merge it with Discovery (DISCA). Shares of AT&T rose about 4%, while Discovery shares increased about 6%. The move would mean that brands including WarnerMedia's HBO and CNN and Discovery's HGTV, Animal Planet, Food Network, and TLC would all be housed in one portfolio.
The combined new company would form one of the largest global streaming platforms, and proceeds from the deal for AT&T will allow it to pay down a considerable debt-load as it expands its broadband business. AT&T is set to receive $43 billion in a combination of cash, debt securities and WarnerMedia's retention of certain debt, according to the press release announcing the deal.
Discovery President and CEO David Zaslav is set to lead the new combined company following the close of the transaction, which is expected to take place in mid-2022.
9:31 a.m. ET: Stocks open lower
Here's where markets were trading after the opening bell:
S&P 500 (^GSPC): -9.33 points (-0.23%) to 4,164.09
Dow (^DJI): -9.57 points (-0.3%) to 34,372.56
Nasdaq (^IXIC): -101.53 points (-0.76%) to 13,327.25
Crude (CL=F): +$0.15 (+0.23%) to $65.52 a barrel
Gold (GC=F): +$10.30 (+0.56%) to $1,848.40 per ounce
10-year Treasury (^TNX): +0.5 bps to yield 1.64%
7:32 a.m. ET Monday: Stock futures fall
Here were the main moves in markets ahead of the opening bell:
S&P 500 futures (ES=F): 4,153.25, down 15.75 points or 0.38%
Dow futures (YM=F): 34,175.00, down 143 points or 0.42%
Nasdaq futures (NQ=F): 13,331.5, down 55.5 points or 0.41%
Crude (CL=F): -$0.09 (-0.14%) to $65.28 a barrel
Gold (GC=F): +$11.20 (+0.61%) to $1,849.30 per ounce
10-year Treasury (^TNX): +0.2 bps to yield 1.637%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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