4:21pm: No shortage of laggards on the Dow
The Dow closed Tuesday down 245 points, 0.7%, at 34,054, the Nasdaq Composite fell 22 points, 0.2%, to 16,337 and the S&P 500 declined 21 points, 0.5%, to 4,389. The small-cap Russell 2000 index slid 9 points, 0.5%, to 1,887.
Tuesday was the first day of the trading week following the Juneteenth holiday, but markets closed lower for the second session in a row.
Hurting the DJIA were Nike, Intel and Boeing, shares of which all fell at least 3%.
“We believe equity markets are as stretched as they can get with market participants wary of missing a potential new bull market,” Mike Wilson, chief US equity strategist at Morgan Stanley, wrote in a note Tuesday.
12:05pm: Energy stocks lead S&P 500 lower
US stocks retreated in noon trading as investors were jittery ahead of Federal Reserve chair Jerome Powell's two-day testimony to a House committee beginning on Wednesday.
At midday, the Dow gained lost 310 points to 33,989, while the S&P 500 eased 31 points at 4,378 and the tech-heavy Nasdaq slipped 93 points to 13,597.
“As we enter a new albeit holiday-shortened week, we’ve got to find credible reasons to continue to grind higher against the forces of negativity that still linger around potential recession, which seems to be like ‘Waiting for Godot,’ and the potential for the Fed that remain rigorous against inflation,” B Riley Financial chief market strategist Art Hogan said.
Notable movers included shares of Dice Therapeutics Inc, which surged more than 37% after Eli Lilly announced that it would acquire the biopharmaceutical company for $48 per share in cash, valuing Dice at about $2.4 billion.
9:40am: Housing starts surge
US stocks started the shortened trading week lower as investors weighed up new economic data from the residential construction sector ahead of Fed chair Jerome Powell’s Congressional testimony on Wednesday.
Just after the opening bell, the Dow Jones had shed 167 points or 0.5% at 34,132 points, the S&P 500 was down 15 points or 0.3% at 4,395 points, and the Nasdaq was down 19 points or 0.15 at 13,675 points.
New housing starts in May surged 21.7% to 1.63 million above the consensus expectation of 1.4 million.
Building permits also increased more than expected, up 5.2% at 1.49 million above the expected 1.42 million.
Pantheon Macroeconomics senior US economist Kieran Clancy commented that the rebound in residential construction would soon run out of road.
“The ongoing bounce in housing starts and new home sales, and the surge in homebuilders’ stock prices, is fuelling the emerging narrative in parts of the commentariat that housing is now recovering, but the new home market is not the whole housing market,” Clancy pointed out.
“Total mortgage applications are bouncing along the floor, at best, and affordability remains extremely stretched, fundamentally limiting the scope for further increases in housing starts and new home sales.
“A sustained recovery in housing requires a meaningful improvement in affordability, via lower mortgage rates, falling home prices, or both. Neither will happen overnight.”
7:50am: All eyes on Powell
US stocks are expected to drift lower as traders return from the extended weekend break and look to Federal Reserve chair Jerome Powell’s semi-annual report to Congress on the state of US monetary policy on Wednesday for more direction. Ahead of that US housing data for May will also be scrutinized.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.3% in pre-market trading, while those for the broader S&P 500 index and contracts for the Nasdaq-100 were also 0.3% lower.
The main US indexes closed weaker on Friday as stocks took a breather from the rally that followed the Fed’s decision to pause on interest rate hikes at last week's Federal Open Market Committee meeting.
The DJIA fell 0.3% to 34,300, the Nasdaq Composite slid 0.7% to 13,690 and the S&P 500 declined 0.4% to 4,410. The small-cap Russell 2000 index ended 0.9% lower at 1,872.
“Investor attention will be drawn to housing data today, specifically housing starts and building permits, ahead of Fed Chair Powell's semi-annual testimony to Congress Wednesday,” commented TickMill Group market analyst Patrick Munnelly.
“His comments will provide additional insights into the Fed's decision to skip a rate hike last week and offer further discussions on the prospects of Fed policy, including the conditions necessary to support or dismiss the policymakers' 'dot plot' projections, which currently indicate expectations of 50bps of additional hikes in the second half of the year," he added.
Contact the author at stephen.gunnion@proactiveinvestors.com