The S&P 500 and the Nasdaq closed lower on Tuesday, easing from record highs as hotter-than-expected inflation data and an increasingly tenuous U.S.-Iran ceasefire prompted investors to take money off the table near the end of a robust first-quarter earnings season. Weakness in tech shares dragged the Nasdaq down the most, while healthcare stocks, buoyed by a jump in Humana, helped keep the Dow in positive territory.
Despite the selloff, the S&P 500 and the Nasdaq remain close to all-time highs.
As reporting season wraps up, investors are increasingly focused on valuations, macroeconomics and geopolitical developments.
While the PHLX Semiconductor index tumbled, the index has soared over 60% this year, benefiting from the fervor about artificial intelligence.
“Our call has been for the market to flatten out simply because greed occurs during earnings season and fear after,” said Jay Hatfield, CEO and portfolio manager at InfraCap in New York.
CONSUMER PRICE RISE DISAPPOINTS Economic data showed consumer prices rising at a faster pace than analysts anticipated as the closure of the Strait of Hormuz due to the war with Iran continued to disrupt crude supply.
“Inflation is not getting any better unless oil prices go down,” Hatfield added. “That’s the history that you can set your watch by.” The Iran war, in its 11th week, showed no signs of a near-term resolution. U.S. President Donald Trump declared the truce was “on life support” after Tehran rejected a U.S. proposal to end the conflict, sticking with a list of demands Trump called “garbage.” The notion of a protracted conflict raises the probability that spiking energy prices could metastasize into broader, more entrenched inflation. That has all but squelched hopes for an interest rate cut from the Fed this year under the presumed chairmanship of Kevin Warsh, whom the U.S. Senate confirmed to the Fed board on Tuesday.”Warsh is not going to be able to cut rates even if he wants to, and I don’t think he will want to,” Hatfield said, adding he was optimistic about Warsh’s Fed reform plans.
The odds of a rate hike are rising. Financial markets are pricing more than a 30% likelihood that the central bank will implement a 25-basis-point increase to its Fed funds target rate in December, up from 21.5% on Monday, according to CME’s FedWatch tool. Trump is scheduled to travel to Beijing this week to meet Chinese counterpart Xi Jinping to address a wide array of issues, including tariffs, U.S. military aid to Taiwan, China’s potential role in brokering a peace deal with Iran, and the extension of a trade agreement regarding critical rare earth metals.
According to preliminary data, the S&P 500 lost 11.16 points, or 0.15%, to end at 7,401.68 points, while the Nasdaq Composite lost 184.67 points, or 0.70%, to 26,089.45. The Dow Jones Industrial Average rose 71.37 points, or 0.14%, to 49,775.84.
Humana advanced following Bernstein’s 36% price target hike. GameStop dipped following eBay’s rejection of the meme stock trailblazer’s $56 billion takeover bid.
Zebra Technologies jumped after the barcode scanner maker raised its annual sales growth forecast, betting on robust demand for its products that help automate manufacturing workflows. Hims & Hers Health tumbled after the telehealth firm missed Wall Street estimates for first-quarter revenue and posted a surprise loss.
Venture Global jumped after the LNG exporter raised its annual adjusted core profit forecast.