By Will Horner and Amber Burton 

Technology shares inched higher Tuesday and were poised for a modest rebound after coming under pressure in recent sessions on worries about accelerating inflation.

The Nasdaq Composite gained 0.6%, on course to pare some recent losses. The S&P 500 slipped less than 0.1%, while the Dow Jones Industrial Average declined 0.2%.

Stocks have been choppy in recent trading sessions as concerns about a rise in inflation weighed on sentiment. Investors are contending with a raft of unknowns, such as whether rising prices will prove temporary or more persistent, and whether the Federal Reserve will act by raising interest rates sooner than planned.

"That always was the key risk: central banks taking away the liquidity punch bowl before the party has ended," said Brian O'Reilly, head of market strategy for Mediolanum International Funds.

Inflation ranging between 2% and 4% could be the "sweet spot" for stocks, said Mr. O'Reilly. The economic rebound that is fueling inflation is likely to continue benefiting stocks, such as banks, as well as travel and leisure companies, that are sensitive to the reopening. But companies with strong balance sheets and an ability to raise prices, such as pharmaceutical companies and makers of common household goods, should also do well, he said.

"Inflation isn't necessarily bad for equities, but there will be winners and losers in terms of [which ones] are better at passing on that inflation to the customer," Mr. O'Reilly said.

While tech stocks have taken the biggest hit from rising inflation concerns, some investors see the recent retreat as an opportunity to buy fast-growing companies.

"Within tech, there are still some companies that look very cheap," said Jane Shoemake, client portfolio manager at Janus Henderson Investors. "If you believe in the longer-term trends supporting these companies, you should be buying."

Among individual stocks, AT&T dropped 5%, extending its losses following its deal with Discovery to merge their media assets into a new, publicly traded business.

Macy's gained 0.9% after reporting first-quarter earnings that beat expectations. Walmart advanced 2.4% after the retailer lifted its guidance for the year. Home Depot fell 0.5% even after surpassing earnings expectations.

The more subdued reaction in stocks following earnings has been a trend this earnings season, said Ross Mayfield, an investment strategy analyst at Baird.

"This was a really strong earnings season, but the stock reaction has been pretty mixed in the day or two after big beats," he said. "I think for investors more broadly, there's just a ton of good news [already] priced into the stock and so you're seeing kind of a muted reaction."

The yield on the 10-year Treasury note rose to 1.659% from 1.639% Monday. Bond yields rise as prices fall.

Brent crude slipped 2.3% to $67.84 a barrel. The global oil benchmark earlier climbed above $70 a barrel for the second time since the onset of the pandemic amid hopes for fuel demand.

Overseas, the Stoxx Europe 600 edged up 0.2%. The U.K.'s FTSE 100 gained less than 0.1% after data showed the U.K.'s unemployment rate edged lower in April.

Most major Asian indexes closed higher. Japan's Nikkei 225 gained 2.1%, while in Hong Kong, the Hang Seng Index rose 1.4%. Taiwan's Taiex jumped 5.2%. In mainland China, the Shanghai Composite Index edged up 0.3%.

Write to Will Horner at and Amber Burton at


(END) Dow Jones Newswires

May 18, 2021 13:00 ET (17:00 GMT)

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