The Dow added just 45 points, or 0.1%, to come off session highs. The S&P 500 ended a tick below the flat line, while the Nasdaq also ended in slightly negative territory. Treasury yields rose across the curve, and the benchmark 10-year Treasury yield hovered above 1.6%. Brent and U.S. crude oil prices gained after OPEC+ suggested oil stockpiles would slide further as the post-pandemic recovery ramps later this year.
Over the past several weeks, equity investors have at least temporarily shaken off fears over fast-rising prices for consumer and producer goods during the economic recovery, especially as officials at the Federal Reserve reassured market participants that they did not yet see inflationary pressures that would warrant a shift in monetary policy in the near-term. Still, inflation hedges like precious metals were some of the best-performers in May, signaling an undercurrent of jitters over rising prices. Of 38 non-currency assets tracked by Deutsche Bank, silver was the best-performing asset with an 8.1% gain, followed by gold with a 7.9% increase, analysts from the bank wrote in a note Tuesday.
Later this week, investors are poised to receive a number of new economic data reports about the U.S. labor market, including the May jobs report. These will further elucidate the strength of the economic recovery, showing whether re-hiring has picked up enough to help alleviate labor shortages cited by a number of companies during the recovery. It will also signal whether the economy is getting closer to the Federal Reserve's goal of achieving maximum employment before pulling back on monetary policy support.
But monetary policy aside, some strategists said it would behoove investors to consider implications of new fiscal policies, especially with prospects of a stronger economy emboldening the government to raise taxes for new plans. Late last week, President Joe Biden unveiled a $6 trillion budget proposal for fiscal 2022, which would include a number of proposals around improving the country's infrastructure, educational resources and health care system and which would be funded in part by higher taxes.
"I think we're learning more and more about the president's budget and it's chock full of new taxes, not just for corporations but for individuals. Now, in a perverse manner, this fiscal drag may actually help inflation by muting it. But what it tells me as an investor, is that we've had all this stimulus, there's going to be some lagged effect going into the second half of this year," Nancy Tengler, chief investment officer of Laffer Tengler Investments, told Yahoo Finance.
"With rising taxes and probably rising interest rates, we're going to see a slowdown in the economy which would then yield a return to the growth rate from the value trade," she added. "So we've been positioning ourselves for that, adding to high-quality growth names on sale over the last six months."
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4:03 p.m. ET: Stocks end mixed to kick off June: Dow ekes out gain while S&P 500 and Nasdaq tick below the flat line
Here were the main moves in markets as of 4:03 p.m. ET:
Gold (GC=F): -$2.80 (-0.15%) to $1,902.50 per ounce
10-year Treasury (^TNX): +3.4 bps to yield 1.6150%
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12:44 p.m. ET: 'Three key themes' in the markets are at the center of asset managers' attention right now: Strategist
While inflation continues to be a major point of concern for many market participants, a number of other major, related factors are also central to markets at the moment, according to at least one strategist.
"I think if I had to distill the market to three key themes right now, it would be momentum or trend, volatility, and valuation," Josh Kutin, Columbia Threadneedle head of asset allocation North America, told Yahoo Finance on Tuesday. "And those have really been the guiding forces of a lot of our asset allocation decisions at the moment."
"So momentum and trend have been positive for now going on a year, with a couple of minor blips," he added. "Volatility has had some fits and starts but for now has remained relatively low. And it's really that valuation metric which we continue to be a little bit worried about in the sense that it keeps on trending in a maximum overweight type of a territory."
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11:30 a.m. ET: Nasdaq turn lower as tech stocks fall
Stocks reversed course on Tuesday to trade mostly lower, with heavily weighted technology shares dragging on both the S&P 500 and Nasdaq. The S&P 500 hovered near the flat line, while the Nasdaq dropped about 0.2%.
The cyclical energy, materials and financials sectors outperformed in the S&P 500, while health care, utilities and information technology lagged. Chevron, Goldman Sachs and American Express were the Dow outperformers, while Johnson & Johnson and Salesforce lagged.
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10:26 a.m. ET: Construction spending moderated in April after March jump
Construction spending had increased 1.0% in March, with much of that advance coming as a result of a rebound after inclement weather in February. Homebuilding in April was still an area of outperformance, with this rising by 1%. Non-residential construction was down by 0.5%, while government building projects were down by 0.6%.
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10:20 a.m. ET: Manufacturing sector expanded more than expected in May
The Institute for Supply Management's May purchasing managers' index increased to 61.2 from 60.7 in April, rising at the fastest rate since March. This also exceeded estimates for a print of 61.0, according to Bloomberg data. Much of the increase was attributable to a jump in new orders, with the subindex tracking these rising to 67.0 from 64.3 in April.
Readings above the neutral level of 50 indicate expansion in a sector.
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9:30 a.m. ET Stocks open higher
Here's where markets were trading after the opening bell:
S&P 500 (^GSPC): +29.36 points (+0.7%) to 4,233.47
NEW YORK, NEW YORK - MAY 11: The New York Stock Exchange stands in lower Manhattan after global stocks fell as concerns mount that rising inflation will prompt central banks to tighten monetary policy on May 11, 2021 in New York City. By mid afternoon the tech-heavy Nasdaq Composite had lost 0.6% after falling 2.2% at its session low. (Photo by Spencer Platt/Getty Images) ·Spencer Platt via Getty Images
