US Stocks Dip From Records Ahead of Fed06/15 15:52
U.S. stocks slipped from their record heights Tuesday as investors wait to
hear whether the Federal Reserve will give any clue about when it may let up on
its massive support for markets.
NEW YORK (AP) -- U.S. stocks slipped from their record heights Tuesday as
investors wait to hear whether the Federal Reserve will give any clue about
when it may let up on its massive support for markets.
The S&P 500 dipped 8.56, or 0.2%, to 4,246.59, as the Federal Reserve began
a two-day meeting on interest-rate policy. A day earlier, the index returned to
an all-time high amid optimism that ultralow interest rates pegged by the Fed,
COVID-19 vaccinations and financial support from the government are revving up
The Dow Jones Industrial Average lost 94.42 points, or 0.3%, to 34,299.33.
The Nasdaq composite fell 101.29, or 0.7%, to 14,072.86 from its own record.
The S&P 500 was down as much as 0.4% earlier in the day, after a report
showed inflation on the wholesale level leaped last month by even more than
economists expected. Prices for producers were 6.6% higher in May than a year
earlier, the highest figure on record going back to 2010 and the latest
evidence that inflation is bursting higher across the economy.
The fear is that if higher inflation gets entrenched, it could force the Fed
to pull back on the $120 billion in monthly purchases of bonds it's pledged to
keep mortgages cheap and longer-term interest rates low, as well as raise
short-term interest rates off their record low.
The Fed has so far said that it sees higher inflation as being only
temporary, and it will announce its latest decision on rate policy Wednesday
"From a prices standpoint, we're seeing inflationary pressure, and we
believe the jury is still out on the timing and extent of when we see a
leveling or whether this new new normal of higher prices is cemented," said
Greg Bassuk, founder and CEO of AXS Investments.
Most economists expect the Fed to say again on Wednesday that it sees higher
inflation being only temporary, which would allow it to hold steady on its
support for markets. But they also say Wednesday afternoon could offer the
first sign that the Fed is mulling when to start slowing its purchases of bonds.
Many investors agree with the Fed's view that higher inflation won't last
very long, and that it's the expected result of an economy escaping out of
pandemic lockdowns. A survey of fund managers said that 72% say inflation is
only "transitory," according to BofA Global Research. That has the majority
saying that any upcoming drop in stock prices would likely be less than 10%.
A peaceful tapering of bond purchases could allow prices to remain high
across markets, even amid criticism that they've grown too expensive, unlike
the pain that would result from a quick shutoff of Fed support.
There are limited signs that inflation may be cooling in some parts of the
economy. Lumber and copper prices have dropped from their highs a few weeks
ago. Copper sank another 4.3% Wednesday, and miner Freeport-McMoRan's stock
Other reports on the economy Tuesday painted a mixed picture. Retail sales
fell 1.3% in May from April, slamming into reverse after a 0.9% gain the prior
month, for a much steeper drop than economists expected.
Part of that is likely the fading effect of rescue payments the U.S.
government sent to households earlier this year, which boosted spending in
March and April. But economists said it could also be a sign that Americans are
shifting more of their spending toward trips, eating out and other services as
the economy reopens, with less going to things bought at retailers.
A separate report said that industrial production across the country rose
more last month than economists expected.
Technology stocks were one of the biggest drags on the S&P 500, though the
majority of stocks within the index rose.
Energy companies had solid gains as the price of crude oil pushed higher.
Exxon Mobil gained 3.6%, and Chevron climbed 2.2%.
Bond yields were relatively stable. The yield on the 10-year Treasury note
dipped to 1.49% from 1.50% late Monday.
Earlier in the day, European stock markets closed out with modest gains.
Asian markets were mixed, with Japan's Nikkei 225 up 1% and stocks in Shanghai