Stocks slide on Wall Street as messy May comes to an end

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A woman wearing a face mask walks past a bank’s electronic board showing the Hong Kong stock index in Hong Kong, Tuesday, May 31, 2022. Asian stocks were mixed on Tuesday after reports showed the slowdown manufacturing in China moderates as antivirus dampens businesses in Shanghai and Beijing ease. (AP Photo/Kin Cheung)

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Stocks closed lower on Tuesday and the market made a small gain for May, a fitting end to a tumultuous month as worries about a possible recession, inflation and rising interest rates battered Wall Street.

The S&P 500 fell 0.6%, after recouping about half of its loss earlier in the day. The Dow Jones Industrial Average fell 0.7%, while the Nasdaq composite slipped 0.4%. Both also pared some of their losses after falling at least 1.4%.

Such swings should perhaps come as no surprise given Wall Street action this month, amid some of the wildest trading since the early days of the pandemic. The S&P 500 ended the month with a gain of less than 0.1%, after falling 8.8% in April. The index is now 13.9% below its record set at the start of this year. But the month’s slight movement belies the sharp declines and rises that have rattled investors along the way.

Through mid-May, the S&P 500 fell to seven straight losing streaks for its longest streak since the dotcom bubble burst two decades ago. Softening data on the U.S. economy has heightened fears that high inflation will force the Federal Reserve to raise interest rates so aggressively that it will trigger a recession.

Some top retailers also said inflation was eating away at their profits, adding more urgency to concerns. They all combined to bring Wall Street to the brink of what’s called a bear market, where the S&P 500 was poised to close more than 20% below its all-time high.

“Outside of a peace deal in Ukraine, it’s hard to justify more than a bearish rally,” which would only be a temporary rise in stocks, wrote Morgan Stanley strategists led by Michael Wilson in a report. . They said that the more stock prices rise, the more likely the Federal Reserve will be to raise interest rates.

The S&P 500 fell 26.09 points to 4,132.15, while the Dow lost 222.84 points to 32,990.12. The Nasdaq lost 49.74 points to 12,081.39.

Stocks of small companies feel more than the broader market. The Russell 2000 slipped 23.85 points, or 1.3%, to 1,864.04.

Trading has been turbulent in recent weeks amid concerns over a possible recession, inflation and rising interest rates.

Underlining concerns about inflation, oil prices rose briefly on Tuesday after the European Union agreed to block the majority of oil imports from Russia due to its invasion of Ukraine. Benchmark US crude ended up falling 0.3% to $114.67 a barrel. Brent, the international standard, rose 1% to settle at $122.84 a barrel.

The more than 50% jump in oil prices so far this year has been a major contributor to the very high inflation that is sweeping the world. Earlier on Tuesday, a report showed inflation in the 19 countries that use the euro hit 8.1% in May, the highest level since records began in 1997.

In the United States, President Joe Biden met with Federal Reserve Chairman Jerome Powell as soaring inflation continues to eat away at Americans’ incomes.

The meeting, marked the first since Biden reappointed Powell to lead the central bank and weeks after the Senate confirmed a second term.

“My plan to fight inflation starts with a simple proposition: respect the Fed, respect the independence of the Fed,” Biden said.

Stocks have managed to avoid a full-fledged bear market, at least so far, with the S&P 500 yet to close more than 20% below its all-time high. The S&P 500 just had its best week in a year and a half, partly on hopes that inflation has peaked and is starting to moderate. Speculation has grown that the Fed may consider a pause in rate hikes at its September meeting.

The easing of anti-COVID restrictions in China has also helped, alleviating some of the worries about the world’s second-largest economy and more problems with global supply chains.

Chinese factory activity contracted again in May, but has almost started to grow again. More factories, shops and other businesses are allowed to reopen this week in Shanghai and the Chinese capital, Beijing, after authorities said outbreaks were under control.

Shares in Shanghai and Hong Kong rose more than 1%.

On Wall Street, healthcare, technology and energy stocks were among the biggest drags on the market. UnitedHealth Group fell 2%, Adobe 2.7% and Chevron 2%.

Some sectors of the stock market that have been particularly hard hit this year have also risen, including internet-related stocks. Amazon rose 4.4% and Class A shares of Google’s parent company gained 1.1%.

US Treasury yields rose on reports that US consumer confidence was higher than economists expected and house prices rose more than expected.

The 10-year Treasury yield climbed to 2.85% from 2.75% on Friday night.

Starting Wednesday, the Fed will begin allowing some of the trillions of dollars in Treasuries and other bonds it amassed during the pandemic to come off its balance sheet. Such a move should put upward pressure on long-term Treasury yields, and it is one of the ways the Fed is trying to stamp out inflation by slowing the economy.

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AP Business Writer Elaine Kurtenbach contributed. Veiga reported from Los Angeles.


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Felix J. Dixon