Market Snapshot: Dow, S&P 500 decline Monday as tech stocks face fresh selling

United States

U.S. stocks were lower Monday midday, with technology shares under pressure, following the worst week for the three main equity benchmarks in nearly three months on the back of fears of rising inflation.

How are stock benchmarking trading?
  • The Dow Jones Industrial Average DJIA, -0.36% was trading 133 points lower to reach about 34,245, a decline of 0.4%.
  • The S&P 500 index SPX, -0.47% was off 20 points, or 0.5%, at around 4,153.
  • The Nasdaq Composite Index COMP, -0.85% was trading 121 points lower at 13,308, a retreat of 0.9%.

On Friday, the Dow, S&P 500 and the Nasdaq Composite Index all logged their steepest weekly losses since Feb. 26, with the Nasdaq also booking its lengthiest weekly losing streak, four straight, since Aug. 23, 2019.

What’s driving the market?

Inflation fears continue to plague the market and investors were looking toward Wednesday’s release of minutes from the Federal Reserve’s most recent meeting to help gauge the central bank’s tolerance for pricing pressures in recovery phase of the COVID pandemic.

“We are going to continue to hyper-focus on inflation for the foreseeable future, because it matters: Inflation and inflation expectations impact consumer behavior, and they impact monetary policy. In the current context, inflation may also impact fiscal policy,” wrote Northern Trust Wealth Management CIO Katie Nixon, in a research report on Monday.

A number of Fed members, thus far, have described those pressures as likely transitory, even after last Wednesday’s read on consumer inflation came in at its hottest rate since 2008. 

Read:‘Jammed and distorted’: investors are wrestling with inflation that may test the Fed’s framework

“Traders are very much going to be focused on the biggest event of this week: the Fed’s minutes, and they will like to know what the Federal Reserve thinks about the recent US CPI data,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.

“Remember, the Fed has shown no concerns about soaring inflation for the time being as they believe that the current surge is only temporary,” the analyst wrote.

Meanwhile, data in the world’s second-largest economy showed some evidence of China’s sluggish pace of recovery from COVID.

Retail sales rose 17.7% from the pandemic-hit level a year earlier, short of March’s 34.2% pace. On top of that, April industrial production rose 9.8% from a year earlier, slower than March’s 14.1% pace, reported The Wall Street Journal, citing the National Bureau of Statistics. Fixed-asset investment showed a rise of 19.9% in the January-April period, compared with 25.6% in the first quarter.

Those readings come after similar reports for retail sales in the U.S. for April came in flat and a report on U.S. manufacturing output rose 0.7% in April, weaker than economists forecast.

Domestically, equity markets have been underpinned by a brightening outlook for the U.S. economy and corporate earnings, with strategists increasing 2021 earnings estimates at the fastest rate since Donald Trump’s 2018 tax-cut plan prompted a reassessment of the outlook for corporate profits, Bloomberg News reports.

Earnings per share for the S&P 500 has risen 5.7% to $ 183.90 from $ 174, according to Bloomberg.

The increase underscores a predicament where the economic picture is rosier but jitters around inflation threaten to knock investment markets around for the near term.

“Investors are afraid [to] commit, which is why we’re missing the confidence of a few weeks ago in the market, particularly in the tech sector,” wrote J.J. Kinahan, TD Ameritrade’s chief market strategist.

“There are a so many question marks spinning around at this point, we’re really at a fork in the road in terms of inflation, rates and ‘back to work’,” he wrote.

Trading on Monday also was influenced by reports that AT&T is in advanced talks to merge WarnerMedia, which includes HBO, with Discovery, according to sources. 

Atlanta Fed President Raphael Bostic said Monday in a CNBC interview, that he supports continued easy monetary policy, and that it will take a “couple of months” to understand the inflation dynamics that are underway as the economy is recovering from the pandemic.

Fed Vice Chairman Richard Clarida said it’s too soon to scale back Fed asset purchases and that he expects higher inflation to be temporary, but that he’s also watching economic data closely, while speaking at the Atlanta Fed’s financial market conference.

Which companies are in focus?
  • Shares of AT&T Inc. T, +1.09%  were up 0.6% after the deal announcement, while those for Discovery Inc. DISCA, -3.67%  was down 4%.
  • AMC Entertainment Holdings AMC, +7.46% rallied 7.1%, putting them on track to stretch their winning streak to seven sessions.
  • Redbox announced Monday plans to go public through a merger with special-purpose acquisition company, in a deal valuing the new-release movies and home entertainment company at $ 693 million. Redbox is owned by Apollo Global Management Inc., which it acquired through the purchase of Outerwall in September 2016. 
  • Shares of Nuvve Holding Corp. NVVE, +48.10%  shot up 35% Monday, after the commercial vehicle-to-grid technology company and Stonepeak Partners LP announced plans to form a new joint venture called Levo Mobility LLC to deploy electric vehicle charging for school buses and other commercial EV fleets. 
  • United Airlines Holdings Inc.  UAL, +1.41% said Monday that it is adding more than 400 daily flights to its July schedule and will increase its service to destinations in Europe, as booking for summer travel had more than tripled (up 214%) compared with 2020 levels. Shares were up 1.4%.
  • Pizza Hut and Beyond Meat Inc.  BYND, -3.39% said Monday that the plant-based meat alternative will be coming to Pizza Hut menus in Edmonton and the Greater Toronto Area. Pizza Hut is part of the Yum Brands Inc. YUM, -0.73%  portfolio. Shares of Beyond were off 4%, while those for Yum were down 0.8%.
  • Hexo Corp. HEXO said Monday it has agreed to acquire 48North Cannabis Corp. NCNNF in an all-stock deal valued at about C$ 50 million ($ 41.3 million).
  • Curaleaf Holdings Inc. CURLF CURA said Monday it has reached a deal to acquire Los Sueños Farms, the biggest outdoor cannabis grow in Colorado, for $ 67 million in cash, stock and assumed debt.
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y rose by about 1 basis point to 1.64%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the U.S. currency against a basket of six major rivals, was up 0.1% around 90.21.
  • West Texas Intermediate crude for June delivery CL.1, 0.89% edged 82 cents higher, or 0.2%, to $ 66.21 a barrel on the New York Mercantile Exchange. June gold GCM21 rose $ 28.10, or 1.5%, at $ 1,866 an ounce on Comex.
  • European equities declined, with the Stoxx 600 SXXP ending off less than 0.1% and London’s FTSE 100 UKX retreated 0.2%.
  • In Asia, Hong Kong’s Hang Seng Index HSI advanced 0.6%, the Shanghai Composite SHCOMP gained 0.8%. However a rise in COVID cases has led to bearishness in Japan, with its Nikkei 225 NIK closing 0.9% and Taiwan’s TAIEX Y9999 closing off 3%.