An NYSE sign is seen on the floor at the New York Stock Exchange in New York, on June 15, 2022. (AP Photo/Seth Wenig, File)
By Stan Choe
Stocks pulled back Tuesday in their first trading after a five-week rally carried Wall Street to its highest level since the spring of last year.
The S&P 500 fell 20.88 points, or 0.5%, to 4,388.71. The Dow Jones Industrial Average dropped 245.25, or 0.7%, to 34,053.87, and the Nasdaq composite lost 22.28, or 0.2%, to 13,667.29.
Those hopes are battling against worries that stubborn inflation will force the Fed to keep interest rates higher for longer, which could grind down the economy. With some of the easiest improvements in year-over-year inflation soon to be lapped, a tougher road may be ahead for both the economy and financial markets.
“Leaning on the lessons of the 1970s, the Fed is right to be cautious, even if that represents an inconvenient truth for stock investors,” said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management.
During the 70s, inflation remained high for much longer than hoped, forcing the Fed to ultimately drive the economy into a painful recession by sharply hiking interest rates.
In China, meanwhile, the world’s second-largest economy is stumbling in its recovery following the relaxation of anti-COVID restrictions.
Stocks in Hong Kong tumbled 1.5% Tuesday after China’s central bank cut interest rates by less than some investors had hoped. Stocks in Shanghai slipped 0.5% amid disappointment Chinese authorities didn’t do more to support one of the world’s main drivers of economic growth.
Tuesday marked the first trading for Wall Street following a meeting between Chinese leader Xi Jinping and U.S. Secretary of State Antony Blinken. It yielded no signs of progress from either of the world's largest economies on Taiwan, human rights, technology and other issues of contention.
Most of Wall Street fell, with four out of five stocks in the S&P 500 lower.
Worries about the global economy's strength dragged down prices for crude oil and stocks of companies that pull it from the ground. Energy stocks fell 2.3% for the largest loss among the 11 sectors that make up the S&P 500. Exxon Mobil fell 2.3%, and Chevron lost 2.3%.
Ball Corp., which makes aluminum cans and other products, dropped 4.2%. It said Tuesday that it's considering options for its aerospace business but that “there is no certainty that any formal decision will be made.” Its stock had jumped 7.2% Friday following a report that it was looking to sell the unit.
On the winning side was Dice Therapeutics, which soared 37.2% after Eli Lilly said it would buy the biopharmaceutical company for $2.4 billion in cash. Lilly added 0.9%.
Homebuilders rose after a report showed that U.S. homebuilders broke ground on many more sites last month than economists expected. The number of building permits, an indication of future activity, also accelerated faster than expected.
PulteGroup rose 1.9%, and D.R. Horton gained 1.6%.
In the bond market, the yield on the 10-year Treasury fell to 3.71% from 3.77% late Friday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves more on expectations for the Fed, slipped to 4.68% from 4.72%.
This upcoming week doesn't have many potentially market-moving events coming off a Monday closure in observance of the Juneteenth national holiday.
Fed Chair Jerome Powell will testify before Congress on Wednesday and Thursday. Last week, the Federal Reserve held its benchmark lending rate steady, the first time in more than a year that it didn't announce an increase. But it also warned it could raise rates twice more this year.
The Bank of England will meet on interest-rate policy Thursday. Central banks around the world are heading in diverging directions as they battle inflation amid worries about a pressured global economy.
AP Business Writers Yuri Kageyama and Matt Ott contributed.
U.S. automakers are saying that the blockade of the Ambassador Bridge, a crucial border crossing between the U.S. and Canada, is affecting their production lines. Michelle Krebs of Cox Automotive warns that the disruption "couldn't come at a worst time," amid chip and labor shortages in Detroit.
AND DETROIT-BASED AUTO MAKERS SAY THEY ARE SHUTTING DOWN PLANTS OR SCALING BACK PRODUCTION BECAUSE OF PARTS SHORTAGES.
Sonos reported better than expected Q1 earnings amid chip shortage with the release of its Roam product. CFO Brittany Bagley joined Cheddar News to discuss the smart speaker maker's successful report and its plans to hit its 2024 targets as people leave their homes as pandemic restrictions ease. "Even as people head out in the world, it doesn't mean they don't like to listen to music at home or watch a streaming movie at home," she said. "So there's still a real role for us and our products in peoples lives, sort of, no matter what else they're doing."
Lynn Martin, president of the NYSE Group, explains why investors at the New York Stock Exchange should still feel confident despite the recent Wall Street volatility and discusses the landscape for 2022 when it comes to IPOs and retail investors.
The merger of WarnerMedia and Discovery received Justice Department approval on Wednesday, and Patty Hirsch, EVP of consumer and digital platforms at WarnerMedia, joined Cheddar News to discuss current and future offerings from the media conglomerate that will control both HBO Max and Discovery+. "Content really drives so much, and CNN has always had a very long history of creating an incredible documentaries, incredible content … and this service I think is going to ultimately provide the kind of content consumers want and the kind of content that consumers are going are going to pay for," she said. Hirsch also discussed NFTs in use through its Turner Sports and DC brands.
Black entrepreneurs lead the way in the creation of new businesses, but they often cannot get the necessary funding to get their business off the ground. The Fearless Fund is on a mission to change that, and help Black business owners get venture capital. The fund also offers a unique grant program meant to help entrepreneurs with growth, peer coaching, and more, including grants between $10,000 and $20,000. Arian Simone, Co-Founder and General Partner of Fearless Fund, joins Closing Bell to discuss the Fund's mission, how it helps Black entrepreneurs, and more.
Multinational food company Kellogg’s reported an earnings beat amid supply chain issues and an extended labor strike. Kellogg’s Chairman and CEO c joined Cheddar News to discuss overcoming the obstacles and what's to come for the company. "The first half of the year is really going to be one about rebuilding inventory, and into the second quarter, starting to reestablish promotional activity for our customers and our consumers," Cahillane said. "And then the back half of the year, obviously, we're really much more back in business, and we expect to exit the year with our business in cereal being just as strong as it's ever been."
Sting has sold his catalog of more than 600 songs for $300 million to Universal Music. The deal gives the label the rights to all of his work, including “Every Breath You Take," as well as all future royalties.
Miller Lite is opening the first branded bar in the metaverse, by way of Decentraland, as a way to advertise during the Super Bowl this year without buying an expensive TV commercial slot. Sofia Colucci, global vice president of Miller Family of Brands, joined Cheddar to talk about the new marketing concept. "We have a lot of great partnerships with NFL teams throughout the year but were shut out of advertising during the Super Bowl game, so this pushes us to think creatively and also think of what feels really relevant right now," Colucci said. "There's no question that there's a lot of excitement with the metaverse, and we wanted to participate but in a way that felt right for Miller Lite."
Plans to add affordable housing to a development in Yellow Springs, Ohio, were squashed after comedian Dave Chappelle and other community members spoke out against the project. Chappelle threatened to pull the plug on his local comedy club and restaurant projects if the development had been approved.
Jason Moser, Senior Analyst at The Motley Fool, joined Wake Up With Cheddar to talk about the big takeaways from Disney's Q1 report, which showed the company nearing 130 million Disney+ subscribers as parks revenue ticks up.
