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May 25, 2021, 4:29 p.m. EDT

Dow snaps 3-day win streak as stocks end lower

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By Christine Idzelis and William Watts

U.S. stocks closed lower Tuesday after a weaker-than-expected reading on consumer confidence, while downside risks appeared limited by signs that efforts by Federal Reserve officials to soothe worries over a pickup in inflation were bearing fruit as bond yields eased further.

What are major indexes doing?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.21% fell 81.52 points, or 0.2%, to 34,312.46, snapping a three-day winning streak.

  • The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.11% declined 8.92 points, or 0.2% at 4,188.13.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.82% lost 4 points, barely lower at 13,657.17.

On Monday, stocks rose, with technology shares leading the way. The Dow /zigman2/quotes/210598065/realtime DJIA +0.21% rose 185.14 points, or 0.5%, to finish at 34,393.98. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.11% advanced 1%, while the Nasdaq Composite closed with a gain of 1.5%.

What’s driving the market?

Stocks fell Tuesday after the Conference Board said its survey-based U.S. 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.

Consumer confidence remains higher than last year, “but is not at pre-COVID levels,” said Alessio de Longis, senior portfolio manager at Invesco, in a phone interview Tuesday. “The consumer tends to come later in the cycle,” he said, adding that there’s still room for confidence to build in the economic recovery.

“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.”

Yields for long-dated U.S. government debt on Tuesday fell for a fourth straight session, carving out their lowest level in about three weeks.

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.

“Obviously the Fed is trying to calm the markets,” Nanette Abuhoff Jacobson, global investment strategist for Hartford Funds, said Tuesday in an interview. “They have a really high tolerance for inflation.”

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
35,677.02
+73.94 +0.21%
Volume: 349.08M
Oct. 22, 2021 5:04p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,544.90
-4.88 -0.11%
Volume: 1.82B
Oct. 22, 2021 5:04p
loading...
/zigman2/quotes/210598365/realtime
US : Nasdaq
15,090.20
-125.50 -0.82%
Volume: 5.11M
Oct. 22, 2021 5:16p
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
35,677.02
+73.94 +0.21%
Volume: 349.08M
Oct. 22, 2021 5:04p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,544.90
-4.88 -0.11%
Volume: 1.82B
Oct. 22, 2021 5:04p
loading...
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