U.S. stocks fell Tuesday, as momentum on Wall Street faded following the S&P 500′s best week since 2020.
The Dow Jones Industrial Average shed about 235 points, or 0.7%. The S&P 500 dipped 0.4%. The Nasdaq Composite was little changed.
The U.S. stock market did not open Monday due to the Memorial Day holiday.
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 aseventh 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.”
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 3.5% to more than $119 per barrel. Brent crude, the global oil benchmark, rose 1.9% to about $124 per barrel.
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 gained 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.
With Tuesday being the last day of May, the Dow and the S&P 500 are both on track to close the month marginally higher, while the Nasdaq is down more than 1%.
Traders continue to deliberate whether last week’s bounce marked a bottom as stocks remain well off their highs. The Dow is about 10% below its record, the S&P 500 is down more than 13%, 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.
Investors are looking ahead to Friday for the release of the May jobs report.