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Market Snapshot: U.S. stocks cling to gains as consumer confidence weakens

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U.S. stocks struggled to hang on to small gains Tuesday after a weaker-than-expected reading on consumer confidence, with support attributed in part to signs that efforts by Federal Reserve officials to soothe worries over a pickup in inflationary pressures were bearing fruit.

What are major indexes doing?
  • The Dow Jones Industrial Average
    DJIA,
    -0.07%

    was up 21.62 points, or 0.1%, at 34,415.60.
  • The S&P 500
    SPX,
    -0.06%

    was up 4.02 points, or 0.1%, at 4,201.70.
  • The Nasdaq Composite
    COMP,
    +0.03%

    gained 43.86 points, or 0.3%, to trade at 13,705.03.

On Monday, stocks rose, with technology shares leading the way. The Dow
DJIA,
-0.07%

rose 185.14 points, or 0.5%, to finish at 34,393.98. The S&P 500
SPX,
-0.06%

advanced 1%, while the Nasdaq Composite closed with a gain of 1.5%.

What’s driving the market?

Stocks started the day with modest gains, but pulled back ahead of economic data, then flipped between small gains and losses after the Conference Board said its survey-based consumer-confidence index slipped to 117.2 in May from a revised 117.5 a month earlier. The original April reading was notably higher at 121.7 and had marked a pandemic high.

“Worries about prospects beyond the reopening are likely weighing on consumer attitudes although easing health concerns alongside an economic reopening that will bring back jobs and restore incomes should provide some support over coming months,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a note.

Meanwhile, investors remain focused on inflation and inflation expectations. Rising inflation has been blamed for heightened stock-market volatility after data earlier this month showed the consumer-price index rose 4.2% year-over-year in April. The data prompted fears the Federal Reserve could move earlier than anticipated to begin pulling back on its monetary policy accommodation.

Since then, Fed officials, with few exceptions, have offered reassurances that they view near-term inflation pressures as transitory, signaling they would look through a near-term pickup in price pressures as the economy recovers from the coronavirus pandemic.

For example, the recent strong U.S. inflation readings are not the start of a steady move higher in consumer prices, Chicago Fed President Charles Evans said on Tuesday.

“As a chorus of Fed officials reiterated that the recent pickup in inflation would be transitory, investor fears were soothed about rising prices forcing higher interest rates,” said Lukman Otunuga, senior research analyst at FXTM, in a note. “U.S. equity bulls rejoiced on this development, encouraging buying in expensive growth stocks in sectors such as technology.”

Reassurances by Fed officials, however, haven’t fully erased investor worries, he said, which means markets will remain highly sensitive to changes in inflation expectations and remarks by policy makers, he said.

Chicago Fed President Charles Evans on Tuesday reiterated the transitory inflation message, while also noting that a Friday reading of the Fed’s preferred inflation measure, the personal consumption expenditure index for April, was likely to see a significant increase.

“It is important to emphasize that the recent increase in inflation does not appear to be the precursor of a persistent movement to undesirably high levels of inflation,” said Evans, who is a 2021 voting member of the policy-setting Federal Open Market Committee, in a speech to a virtual conference sponsored by the Bank of Japan.

Bitcoin prices have stabilized, squelching another source of broader market volatility, after extending a tumble last week that took the price of the digital asset down 50% from its all-time high above $60,000 over the weekend.

Read: Dogecoin, bitcoin prices climb as Elon Musk solicits help to improve meme coin, talks sustainability with miners

Investors were also sifting through housing data. New home sales fell in April by nearly 6% as affordability constraints began to weigh on home buyers.

Earlier, the CoreLogic Case-Shiller U.S. home price index for March rose 13.3% on an annual basis in March.

Which companies are in focus?
  • Shares of Lordstown Motors Corp.
    RIDE,
    -13.94%

    were down 11% after the electric-vehicle startup late Monday reported a wider quarterly loss and said it is seeking “additional capital” to fund itself.
  • AutoZone Inc.
    AZO,
    -1.81%

    shares were down 0.9% after reporting earnings and revenue that topped forecasts, while same-store sales in the fiscal third quarter rose 28.9%.
  • Amazon.com Inc.
    AMZN,
    +0.00%

    is near a deal to acquire Hollywood studio MGM Holdings for almost $9 billion including debt, The Wall Street Journal reported Monday, citing people familiar with the matter. Amazon shares were up 0.2%.
  • Moderna Inc.
    MRNA,
    +2.50%

    on Tuesday said a new study showed its COVID-19 vaccine was effective in children aged 12 to 17, a finding that could clear the way for a second-shot for use in adolescents. Moderna shares were up 4.4%.
  • Shares of Cracker Barrel Old Country Store Inc. 
    CBRL,
    -3.81%

     fell 3.6%, after the restaurant and retail company reported a fiscal third-quarter profit beat and restarted its dividend program, with a $1.00 per share quarterly payout. 
  • Vimeo will begin trading on Nasdaq under the ticker ‘VMEO’ after being spun off from IAC/InterActive Corp.
    IAC,
    -4.89%
    .

What are other markets doing?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    1.583%

    was down 3 basis points at $1.576%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index
    DXY,
    -0.11%
    ,
    a measure of the currency against a basket of six major rivals, was down 0.2%.
  • Oil futures saw choppy trade, with the U.S. benchmark
    CL00,
    +0.33%

    up 0.3% at $66.23 a barrel. Gold futures
    GC00,
    +0.40%

    were up 0.3% at $1,891.40 an ounce.
  • The Stoxx Europe 600 index
    SXXP,
    +0.16%

    rose 0.3%, while London’s FTSE 100
    UKX,
    -0.16%

    edged down 0.1%.
  • The Shanghai Composite
    SHCOMP,
    +2.40%

    rose 2.4%, while Hong Kong’s Hang Seng Index
    HSI,
    +1.75%

    gained 1.8% and Japan’s Nikkei 225
    NIK,
    +0.67%

    advanced 0.7%.

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