Stocks Are Slipping as Investors Digest Latest Economic Data – Barron’s


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Investors will closely watch an announcement from the Federal Reserve on Wednesday.

Stefani Reynolds/Bloomberg

U.S. stocks were lower on Tuesday, as investors digested the latest economic news and prepared for a key announcement on rates and fiscal policy from the Federal Reserve on Wednesday.

Government figures released Tuesday morning showed that U.S. retail sales fell 1.3% in May, compared with the decline of 0.6% economists expected, while excluding automobiles, sells fell 0.7%. The producer-price index, an inflation indicator, rose 0.7%, excluding food and energy, while economists had expected an increase of 0.5%.

By midmorning, the Dow Jones Industrial Average was down 118 points, or 0.35%, while the S&P 500 slipped 0.2%, and the Nasdaq Composite fell 0.3%

In Asia, Tokyo’s Nikkei 225 rose 1%, while Hong Kong’s Hang Seng slipped 0.7%. The Shanghai Composite was 0.9% lower. The FTSE 100 in London rose 0.5%, opening at the highest level since February 2020, as the pan-European Stoxx 600 was 0.2% higher and trading at fresh records. The CAC 40 in Paris lifted 0.4% and Frankfurt’s DAX climbed 0.3%.

Investors prepared for Wednesday’s decision from the Fed following the central bank’s June Federal Open Market Committee meeting.

“With the Federal Reserve set to announce its latest decision tomorrow, markets appear to be taking the line of least resistance, which is a slow incremental move higher with a ‘two steps forward and one step back’ approach, over the past week or so,” said Michael Hewson, an analyst at CMC Markets.

Lukman Otunuga, an analyst at FXTM, noted that “although the Fed is widely expected to leave interest rates and policy measures unchanged, all eyes will be on the statement language, updated economic projections and Chair Jerome Powell’s postmeeting press conference.”

“The Fed has managed to persuade markets that the current jump in inflation is transitory. The question is: for how long will they keep this mantra?”

Airbus stock climbed near 0.35% in European trading, while shares in Boeing (BA) rose 0.8%, ahead of the expected settlement of a 17-year trade dispute between the European Union and U.S. over state aid to the aircraft manufacturers. Both companies, rivals, are jewels in the manufacturing crowns of the U.S. and Europe, and the long-running trade spat includes a cumulative $11.5 billion in tariffs on exports. A formal announcement on the agreement is expected on Tuesday, Bloomberg reported.

H&M stock fell 2%, after blowout second-quarter sales at the fashion retail giant fell short of expectations. Sales in local currencies jumped 75% from March to the end of May compared with the same period in the year prior, to 46.51 billion Swedish kroner, which fell short of analysts’ expectations of SEK 48.09 billion.

Shares in EDF, the French multinational energy group, fell as much as 2% before settling 1.2% lower, after reports that one of its nuclear power plants in China could be experiencing a leak. EDF, which jointly owns the plant with the China General Nuclear Power Group, said on Monday that it was dealing with “performance” issues at the facility but that operations remained within safety guidelines.

Olin Corp.  (OLN) stock gained 2% after getting upgraded to Buy from Neutral at UBS.  

Spirit Airlines  (SAVE) stock rose 0.6% after getting upgraded to Buy from Neutral at Citigroup. 

Welltower  (WELL) stock gained 0.8% after getting upgraded to Strong Buy from Market Perform at Raymond James. 

Fastenal  (FAST) stock dropped 2.4% after getting downgraded to Underweight from Equal Weight at Morgan Stanley. 

Principal Financial Group  (PFG) stock fell 0.5% after getting downgraded to Neutral from Overweight at Piper Sandler. 

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com