May’s turbulent month for the markets ended exactly where it began in stocks, with a drop late on Tuesday that deposited the S&P 500 index less than a point above its level a month ago. It was a recent development in a month that saw high volatility and heated debate over inflation, the Federal Reserve’s plan to tame it and impact the economy.
The S&P 500 fell 0.6 percent on Tuesday, bringing its monthly return to nearly zero. During the month of May, the benchmark index rose more than eight percent after falling within 20 percent from a record low, indicating a bear market.
Ten-year Treasury yields rose 12 basis points to 2.85 percent, just below where they started the month. The price of West Texas Intermediate oil has not changed much, which put it 10 percent higher in the month. Bitcoin settled above $31,000, down 17 percent in May.
Stocks started the day lower on concerns that inflation is proving more persistent, intensifying the debate over how quickly central banks can raise interest rates. Eurozone consumer prices jumped 8.1 percent to a record level from a year earlier in May. Meanwhile, WTI pared its gains from the partial ban on Russian oil by the European Union. advance the dollar.
Concerns that an interest rate hike by the central bank could push the economy into recession keep investors vigil as rising food and energy costs put pressure on consumers. May saw almost unprecedented volatility in stocks as the S&P 500 fell more than three percent three different times and capped its longest streak of weekly losses since 2001 and then rose at the end of the month.
These moves come amid doubts over whether the market is approaching a low as volatility continues to rise. The swaps show that traders priced in almost the entirety of two halving point rate hikes in June and July, with odds of a third increase coming in September.
“When you touch on the possibility of lowering earnings estimates significantly as we move through the summer, it encourages our view that the stock market will have to see lower lows before the eventual bottoms,” said Matt Malley, chief market strategist at Miller Tabak + Co.
Federal Reserve Chairman Jerome Powell meets with President Joe Biden in a rare Oval Office meeting on Tuesday to discuss inflation ahead of US payroll numbers later this week. The meeting follows comments made by Federal Reserve Governor Christopher Waller on Monday, which suggest that the Fed should continue to raise interest rates in half a percentage point steps until inflation dips back toward the central bank’s target.
“It’s times like these when investors need a crystal ball,” wrote Jeff Buchbender and Ryan Detrick, strategists at LPL Financial. “We are fully aware of how difficult it is to see the bullish case for stocks at the moment, and a retest of the recent lows is certainly possible, but this week we have put the bullish case for the second half of the year. It starts to swell.”
Among the individual stock moves, Deutsche Bank pulled back after police raided the lender and its asset management unit in Frankfurt. Unilever Plc jumped with activist investor Nelson Peltz joining its board of directors. And US-listed Chinese stocks – including Alibaba Group Holdings Ltd. – rose, erasing the group’s monthly losses as lockdown measures eased in major cities and better-than-expected economic data reassured investors.
Here are some of the main events to watch this week:
- The Federal Reserve is set to begin trimming its $8.9 trillion balance sheet on Wednesday
- The Federal Reserve releases its Beige Book report on regional economic conditions on Wednesday
- New York Fed President John Williams and St. Louis Fed President James Bullard speak at separate events on Wednesday
- OPEC + virtual meeting Wednesday
- Cleveland Fed President Loretta Mester discusses the economic outlook on Thursday
- US employment report for the month of May on Friday
- The United Nations Food and Agriculture Organization on Friday released its monthly food price index at a time of maximum concern over global supplies.
Some of the main movements in the markets:
- The S&P 500 was down 0.6 percent as of 4:05 p.m. New York time
- The Nasdaq 100 index fell 0.3 percent
- The Dow Jones Industrial Average fell 0.7 percent
- The MSCI global index fell 0.6 percent
- Bloomberg spot dollar index rose 0.4 percent
- The euro fell 0.4 percent to $1.0735
- The British pound fell 0.4 percent to $1.2604
- The Japanese yen fell 0.9% to 128.69 per dollar
- The yield on the 10-year Treasury bond advanced 12 basis points to 2.85%
- Germany’s 10-year yield advances seven basis points to 1.12 percent
- The UK 10-year bond yield advanced 11 basis points to 2.10 per cent
- West Texas Intermediate crude fell 0.1 percent to $114.94 a barrel
- Gold futures fell 1 percent to $1,839.10 an ounce