Dow poised to start week under pressure

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© Armando Babani/AFP/Getty Images

MARKET SNAPSHOT

© Armando Babani/AFP/Getty Images

U.S. stocks headed lower Monday morning, with technology shares under pressure, following the worst week for the three main equity benchmarks in nearly thee months on the back of fears of rising inflation.

How are stock benchmarking trading?

  • The Dow Jones Industrial Average was trading 18 points lower to reach about 34,374, a decline of less than 0.1%.
  • The S&P 500 index was off 12 points, or 0.3%, at 4,160.
  • The Nasdaq Composite Index was trading 101 points at 13,331, a retreat of 0.7%.

On Friday, the Dow, S&P 500, and the Nasdaq Composite Index all logged their steepest weekly losses since Feb. 26 and the Nasdaq also booked its lengthiest weekly losing streak, four straight, since Aug. 23, 2019.

What’s driving the market?

Tech stocks led the way lower on Monday, as inflation fears continue to plague the market, and as investors look toward Wednesday’s release of minutes from the Federal Reserve’s most recent meeting to help gauge the central bank’s tolerance for pricing pressures in the aftermath of the COVID pandemic.

“Traders are very much going to be focused on the biggest event of this week: the Fed’s minutes, and they will like to know what the Federal Reserve thinks about the recent U.S. CPI data,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.

A number of Fed members have thus far described those pressures as likely to prove transitory, even after last Wednesday’s read on consumer inflation came in at its hottest rate since 2008

Atlanta Fed President Raphael Bostic told CNBC during a Monday morning interview that “now’s not the time to consider moving,” on raising rates or removing Fed accommodation. . Bostic is a member of the rate-setting Federal Open Market Committee this year.

Read: ‘Jammed and distorted’: investors are wrestling with inflation that may test the Fed’s framework

Bostic also is set to talk with Fed Vice Chairman Richard Clarida at Atlanta Fed banking conference at 10:05 a.m. Eastern.

“Remember, the Fed has shown no concerns about soaring inflation for the time being as they believe that the current surge is only temporary,” Aslam wrote.

Ahead of minutes, a reading of manufacturing activity in New York, the Empire State Manufacturing Index, slipped to a reading of 24.3 in May from a more-than-three-year high of 26.3 in April, the New York Fed said Monday. Economists surveyed by The Wall Street Journal expected a reading of 24.8.

See: The stock market is volatile because it’s hard to tell ‘good’ inflation from ‘bad’

Meanwhile, China’s economy showed some evidence of sluggishness in recovering from COVID.

Retail sales rose 17.7% from the pandemic-hit level a year earlier, short of March’s 34.2% pace. On top of that, April industrial production rose 9.8% from a year earlier, slower than March’s 14.1% pace, reported The Wall Street Journal, citing the National Bureau of Statistics. Fixed-asset investment showed a rise of 19.9% in the January-April period, compared with 25.6% in the first quarter.

Those readings come after similar reports for retail sales in the U.S. for April came in flat and a report on U.S. manufacturing output rose 0.7% in April, weaker than economists forecast.

Domestically, equity markets have been underpinned by a brightening outlook for the U.S. economy and corporate earnings, with strategists increasing 2021 earnings estimates at the fastest rate since Donald Trump’s tax-cut plan prompted a reassessment of the outlook for corporate profits, Bloomberg News reports.

Earnings per share for the S&P 500 have risen 5.7% to $183.90 from $174, according to Bloomberg.

The increase underscores a predicament where the economic picture is rosier but jitters around inflation threaten to knock investment markets around for the near term.

In deal activity, AT&T Inc.’s WarnerMedia and Discovery Inc. agreed to a $43 billion merger.

Which companies are in focus?

  • Shares of AT&T were up 3.8% after the deal announcement, while those for Discovery surged nearly 7%.
  • AMC Entertainment Holdings  rallied 6%, putting them on track to stretch their winning streak to seven sessions.
  • Redbox announced Monday plans to go public through a merger with special-purpose acquisition company, in a deal valuing the new-release movies and home entertainment company at $693 million. Redbox is owned by Apollo Global Management Inc., which it acquired through the purchase of Outerwall in September 2016. 
  • Shares of Nuvve Holding Corp. NVVE shot up 15% Monday, after the commercial vehicle-to-grid technology company and Stonepeak Partners LP announced plans to form a new joint venture called Levo Mobility LLC to deploy electric vehicle charging for school buses and other commercial EV fleets. 
  • United Airlines Holdings IncUAL said Monday that it is adding more than 400 daily flights to its July schedule and will increase its service to destinations in Europe, as booking for summer travel had more than tripled (up 214%) compared with 2020 levels. Shares were up 0.5%.
  • Pizza Hut and Beyond Meat IncBYND said Monday that the plant-based meat alternative will be coming to Pizza Hut menus in Edmonton and the Greater Toronto Area. Pizza Hut is part of the Yum Brands Inc. YUM portfolio. Shares of Beyond were off 0.3%, while those for Yum were down 0.5%.
  • Hexo CorpHEXO said Monday it has agreed to acquire 48North Cannabis CorpNCNNF in an all-stock deal valued at about C$50 million ($41.3 million).
  • Curaleaf Holdings Inc. CURLF CURA said Monday it has reached a deal to acquire Los Sueños Farms, the biggest outdoor cannabis grow in Colorado, for $67 million in cash, stock and assumed debt.

How are other assets faring?

  • The yield on the 10-year Treasury note TMUBMUSD10Y rose by about 1 basis point to 1.64%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the U.S. currency against a basket of six major rivals, was virtually unchanged at around 90.336.
  • West Texas Intermediate crude for June delivery edged 11 cents, or 0.2%, higher to $65.48 a barrel on the New York Mercantile Exchange. June gold rose $8.90, or 0.5%, at $1,847.10 an ounce on Comex.
  • European equities declined, with the Stoxx 600 SXXP off 0.1% and London’s FTSE 100 UKX retreating 0.4%.
  • In Asia, Hong Kong’s Hang Seng Index HSI advanced 0.6%, the Shanghai Composite SHCOMP gained 0.8%. However a rise in COVID cases has led to bearishness in Japan, with its Nikkei 225 closing 0.9% and Taiwan’s TAIEX closing off 3%.
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