By Joy Wiltermuth and Mark DeCambre
Stocks end near session lows
U.S. stock benchmarks finished lower, losing steam in the session's final half-hour, ahead of an eagerly awaited inflation report due Thursday, which could set the tone for the broader financial markets.
A decline of the benchmark 10-year Treasury yield, to its lowest level since March 3, led investors into yield-sensitive assets, including technology stocks, but away from the banking sector.
How did major benchmarks perform?
On Tuesday, stocks barely budged. The Dow fell 30.42 points, or 0.1%, to close at 34,599.82, while the S&P 500 rose less than a full point and the Nasdaq Composite edged up 0.3%.
Read:Why stock traders say 'never short a dull market' ()
What drove the market?
Equities remain stuck in a trading range, with the S&P 500 index hovering near an all-time high and the Dow booking a third day in a row of losses, during a marketwide vigil centered on the prospects for inflation.
"I think the market is trying to digest what's going on in rates," said Jack Janasiewicz, portfolio manager at Natixis Investment Managers in an interview with MarketWatch, while pointing to the recent fall in the 10-year Treasury note yield to about 1.49%, despite expectations that it might head to around 2% by year's end.
The falling 10-year yield occurred despite April's surging consumer-price index, a popular inflation metric, which put already jittery investors about inflation on high alert for a potentially out-of-control climb in prices.
Janasiewicz said falling benchmark yields point to investors "fearing the fear of inflation, as opposed to actual inflation." In the same vein, he thinks higher commodity prices, including oil near $70 a barrel, have been part of that same narrative. "But to us, the backdrop still is supportive," he said. "The cyclical trade still works."
A May reading of the U.S. consumer-price index due on Thursday morning is expected to be the main event of the week. The headline consumer-price index is expected to rise by an outsized 0.5% in May and 4.8% for the year (). A hotter-than-expected April CPI reading, which showed prices rose 4.2% year-over-year, briefly rattled markets last month.
The decline in U.S. Treasury yields to their lowest levels since March or February on Wednesday, implies that investors are shaking off inflation fears for now.
Recent upside inflation surprises have not altered our positive view on global equities, wrote Daniel Grosvenor, director of equity strategy at Oxford Economics in a Wednesday report. "We believe the pick-up (in inflation) will ultimately prove transitory and will not trigger premature policy tightening," the Oxford analyst said.
Economic Preview:U.S. inflation is still climbing and now higher labor costs are adding to the pressure ()
While the overall action in stocks has been comparatively subdued this week, trading among meme stocks, those powered by social-media mentions, have been seismic, including in shares of AMC Entertainment Holdings (AMC), GameStop Corp. (GME), Best Buy (BBY), and a number of new entrants swept up in the trend inspired by individual investors. GameStop reports earnings Wednesday ( ) after the bell.
In Washington, talks between the White House and a group of Republican senators led by West Virginia's Shelley Moore Capito on an infrastructure package broke down Tuesday (), though President Joe Biden still aims to reach a deal on the issue with a different group that includes Republican senators.
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 09, 2021 16:26 ET (20:26 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.