U.S. stocks fell Tuesday as investors look to close out a rocky month of trading that saw the S&P 500 flirt with bear market territory amid inflation and recession fears.
The Dow Jones Industrial Average shed about 155 points, or 0.5%. The S&P 500 dipped 0.4%. The Nasdaq Composite ticked up 0.2%, after being down nearly 1.6% at its lows of the session
After a holiday hiatus Monday, U.S. stocks are wrapping up a roller-coaster May. The Dow and the S&P 500 are both marginally higher on the month, while the Nasdaq is off by around 1.8%.
The month began with the Federal Reserve hiking interest rates by half a percentage point in a bid to tamp down generationally hot inflation.
Tuesday’s moves came amid mounting concerns that rising inflation in the U.S. and around the world could slow down economic growth. In Europe, euro zone inflation hit a record high for a seventh straight month, surging 8.1% in May. In the U.S., the core personal consumption expenditures price index — the Fed’s preferred inflation gauge — rose by 4.9% in April from a year ago.
“It will be difficult to reverse the Fire and Ice,” Morgan Stanley’s Mike Wilson said in a note Tuesday. “Higher inflation and slower growth are now the consensus view but that doesn’t mean it’s fully discounted. The more equity prices rise, the more hawkish the Fed will be.”
Industrial stocks linked to the economic cycle fell Tuesday, weighing on the Dow. 3M, Honeywell and Boeing each lost about 2%.
Healthcare was among the worst-performing S&P sectors, down 1.4% Tuesday. Johnson & Johnson led the Dow to the downside, off by nearly 2%.
Worries over higher inflation also grew as oil prices jumped following the European Union agreeing to ban most crude imports from Russia. West Texas Intermediate futures rose about 3% to more than $118 per barrel. Brent crude, the global oil benchmark, rose more than 1% to nearly $124 per barrel.
Energy stocks were the top sector Tuesday. Marathon Oil jumped more than 4%, while Diamondback Energy rose about 3% and Devon Energy gained more than 2%.
The Dow and the S&P 500 were coming off their best weekly gains since November 2020. The blue-chip average closed up 6.2% for the week, ending an eight-week losing streak. The S&P 500 gained 6.5%, and the Nasdaq added 6.8% on the week, ending positive after seven continual weeks of losses. Solid earnings from the retail sector, as well as an inflation report that showed prices could be easing, lifted investor sentiment.
Still, stocks remain well off their highs. The Dow is about 11% below its record, the S&P 500 is down more than 14%, and the Nasdaq is off by roughly 25%.
“Bear markets are incredibly difficult to navigate, because they are inherently volatile and prone to sharp upside rallies,” Wolfe Research’s Chris Senyek said in a note Tuesday.
Traders will look through more corporate quarterly earnings during the holiday-shortened week. Salesforce, HP and Victoria’s Secret are expected to report earnings on Tuesday after the bell.