By Joy WiltermuthandMark DeCambre
SEC has meme stocks in focus
The Dow Jones Industrial Average booked a modest loss Monday, after briefly surpassing its all-time closing high, while the Nasdaq Composite and small-cap Russell 2000 index finished higher as investors awaited more data on the next leg of the economic recovery.
How did major indexes perform?
Losses on the S&P 500 were led by a 1.2% decline in materials (XLB) shares and a 0.6% fall in those for financials (XLF).
On Friday, stocks rose following a May jobs report () that came in below expectations but showed a pickup in job creation from April. The Dow rose 0.7% for the week, while the S&P 500 gained 0.6% and the Nasdaq Composite advanced 0.5%.
What drove the market?
Stock indexes ended mixed, with the tech-heavy Nasdaq Composite and small-cap Russell 2000 booking gains, as investors looked forward to the release of May inflation data on Thursday to help gauge pricing pressures building up during the most recent leg of the U.S. economic recovery.
"You've got a handful of stocks going berserk, but the rest of the market has been seeing a very slow grind higher," said Sahak Manuelian, head of equity trading at Wedbush Securities, adding that the summer doldrums appear to be setting in after Friday's rally.
Read:As AMC Entertainment stock surges 20%, SEC says it's watching memes for 'disruptions of the market, manipulative trading, or other misconduct' ()
"In some areas, we are seeing the reflation trade stocks are giving back a little bit," Manuelian told MarketWatch, while pointing to Monday's pullback in shares in the materials and industrials sectors.
Investors have been grappling with concerns about the potential for out-of-control inflation, while also weighing the prospects of a major infrastructure plan that may further stimulate economic growth in the rebound from COVID.
"I think we are in a push-pull market," said Joe Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank in an interview with MarketWatch, adding that stocks indexes are consolidating near all-time highs, but that U.S. companies also are expected to deliver another strong round of earnings in the second-quarter.
"We are treading water, but nicely at these elevated levels," he said.
Treasury Secretary Janet Yellen said in an interview Sunday that it would be OK if President Joe Biden's $4 trillion spending plans lift inflation and lead to higher rates ().
"We've been fighting inflation that's too low and interest rates that are too low now for a decade," she told Bloomberg. "We want them to go back to" a normal environment, "and if this helps a little bit to alleviate things then that's not a bad thing -- that's a good thing."
Investors also have been focused on signs of a slower pace of recovery for the U.S. labor market, after May's employment report () fell short of some Wall Street estimates, even as employers across the economy report difficulties attracting workers to fill vacant spots.
"Economic data have been erratic, and we expect more of the same as economies restart amid pent-up consumer demand and supply shortages," wrote a team led by Elga Bartsch, head of macro research at the BlackRock Investment Institute, in a Monday note.
"We advocate looking through near-term market volatility and remain pro-risk, predicated on our belief that the Fed faces a very high bar to change its easy monetary policy stance," she said.
Quinlan said he expects economic data surprises to become "less surprising in the future" and sees signs that markets already may be pricing in a future without full-blown support from the Federal Reserve, including the eventual tapering of its $120 billion-a-month bond buying program.
Read:Taper tantrum? Only if somebody wakes the U.S. bond market ()
On Thursday, the May consumer-price index is scheduled for release, which will offer the latest picture on pricing pressures. A jump in the April reading last month rattled investors last month.
Economic Preview:U.S. inflation is still climbing and now higher labor costs are adding to the pressure ()
Meanwhile, the Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15% (), a move designed to deter multinational companies from avoiding taxes by stashing profit in low-rate countries. The plan must overcome hurdles to implementation, however, including a divided U.S. Congress.
Biden and Sen. Shelley Moore Capito, R-W.Va., were set to meet again Monday () or Tuesday in an attempt to reach a bipartisan agreement on infrastructure spending. Biden on Friday rejected an offer by Capito to add around $50 billion to Senate Republicans' $928 billion plan. Biden, who last week cut the size of his infrastructure proposal to $1.7 trillion, told the lawmaker he wants at least $1 trillion in new spending over current levels versus $250 billion in the Republican plan, according to reports ( ).
The economic calendar () was light Monday, but with April consumer-credit data showing a third straight modest increase ( ), with gains in student debt and auto loans.
Which companies were in focus?
How did other assets fare?
--William Watts contributed reporting
-Joy Wiltermuth; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
June 07, 2021 16:38 ET (20:38 GMT)
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