Stocks Fall as Tech Rebound Loses Steam -- 2nd Update
By Will Horner and Amber Burton
U.S. stocks slipped Tuesday, with investors retreating from
shares of companies closely tied to the economy.
Shares of banks, industrial firms, energy companies and
raw-materials producers led declines in the S&P 500. Investors
had piled into those groups in recent sessions, betting they would
benefit from economic reopening more than technology firms, which
are more sensitive to inflation.
The Dow industrials fell 0.8% as of the 4 p.m. close of trading
in New York, while the S&P 500 dropped 0.9%. The Nasdaq
Composite was down 0.6%.
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
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 5.7%, extending its
losses following its deal with Discovery to merge their media
assets into a new, publicly traded business.
Macy's fell 0.3% after reporting first-quarter earnings that
beat expectations. Walmart advanced 2.4% after the retailer lifted
its guidance for the year. Home Depot fell 0.6% 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 rose less than 0.1% to $69.47 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
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 William.Horner@wsj.com and Amber Burton
(END) Dow Jones Newswires
May 18, 2021 16:17 ET (20:17 GMT)
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