US stocks trimmed early gains to trade the flatline on Tuesday as optimism about the economic reopening met ongoing fears of inflation and price pressures.
The Dow added a modest 60 points, or 0.2%, after gaining up to 300 points after the opening bell in New York. The S&P 500 was unchanged as weakness in technology stocks offset gains in energy, commodities and financials. On Friday, the S&P 500 closed just 0.8% from an all-time high.
The Nasdaq Composite also traded at the flatline as technology stocks lagged the broader market. Previously, all three indices had traded higher.
Investors got off to a good start into the first week of June as US Covid cases continue to decline and US vaccinations increase. As a major milestone, more than half of the US population received at least one dose of Covid vaccination, according to the Centers for Disease Control and Prevention, according to more than half of the US population.
The improving domestic coronavirus situation, coupled with the arrival of summer weather, sparked another day of strong gains in the reopening of Wall Street businesses such as travel and hospitality.
American Airlines and United Airlines each gained about 2% after the Transportation Security Administration said it screened an average of 1.78 million people Friday through Monday, well above the volume a year ago and yet another sign that that US aviation has reached the peak of the pandemic era.
Those volumes are more than six times higher than a year ago, but still 22% below Memorial Day weekend in 2019.
Meanwhile, aircraft maker Boeing gained 2.5% after an analyst advised investors to lower short-term hurdles on the Dow component and buy the stock while it was still below its early 2020 level.
The shares of cruise company Carnival Corp. and Norwegian Cruise Line Holdings, two other reopening leaders, each rose more than 3%.
Energy stocks rose as US oil futures rose 2% to $ 67.66 a barrel. Exxon, Chevron, and Marathon Petroleum all rose.
Meme stock AMC Entertainment even rose after the cinema chain sold $ 230.5 million in new shares to an investor. Shares were up 20% after doubling last week.
The blue chip Dow and S&P 500 rose 1.93% and 0.55% respectively in May, marking their fourth consecutive positive month. The small-cap Russell 2000 rose 0.11% in May, posting its eighth consecutive positive month – its longest monthly winning streak since 1995.
The Nasdaq was up 2.06% last week, its best weekly performance since April. However, the tech-heavy composite lost 1.53% in May, breaking a six-month winning streak.
The stock exchange was closed on Monday for Memorial Day.
Despite the better coronavirus numbers, investors remain unsettled about the potential for a sustained and significant rise in inflation. Higher prices as a result of supply shortages and recovering demand could force the Federal Reserve to raise interest rates and curb asset purchases sooner.
A key inflation indicator – the core consumer spending index – rose 3.1% yoy in April, faster than the forecast increase of 2.9%. Despite the unexpectedly high inflation data, US Treasury bond yields fell on Friday.
“Overall, given the market reaction to [Friday]In the PCE release, investors’ concerns about inflation may be exaggerated – or perhaps already priced in, “said Chris Hussey, managing director at Goldman Sachs, in a press release.
“There could be a consensus that the inflation we see today is ‘good’ inflation – the kind of price spike that comes with accelerated growth, not a monetary policy mistake,” Hussey said.
The investors are waiting for the 15.-16. June scheduled meeting of the Federal Reserve. What matters to the markets is whether the Fed starts to believe that inflation is higher than expected or that the economy will be strengthened enough to move forward without so much monetary support.
The May labor market report, due to be released on Friday, will provide an important overview of the economy. According to the Dow Jones, economists expect around 674,000 new jobs to be created in May after significantly fewer than expected 266,000 jobs were added in April.
Zoom Video Communications and Hewlett Packard Enterprise will release quarterly results on Tuesday after the bell.
– CNBC’s Patti Domm contributed to the coverage.