Stocks traded slightly higher Wednesday as investors at least temporarily set aside concerns over rising inflation. Technology stocks outperformed and the Nasdaq rose, while the S&P 500 and Dow ended slightly above the flat line.
Investors this week have continued to contemplate prospects that higher inflation during the post-pandemic recovery will ultimately curb the extent of the rebound in economic activity and rally in stock prices. New data Tuesday showed consumer confidence dipped in April even as more social distancing standards were lifted, with the decline coming in part as consumers took note of rising price pressures.
“I do think we’ve been in this consolidation phase, really since early April. That’s when we started a new phase in this market cycle, the first one [was] that recovery in stay-at-home stocks from March to November last year, the second phase was the reopening phase from November to March,” Gabriela Santos, global market strategist at JPMorgan Asset Management, told Yahoo Finance. “Now we’re moving beyond the recovery and focusing on the expansion up ahead. And we haven’t had a lot of new data on this recently, so it makes sense to see stocks consolidate.”
“What we’ll start to see over the next few months is for growth to peak and then slowly moderate,” she added. “That’s still a constructive backdrop for stocks. It’s just that the actual sector selection, company selection becomes a lot more important. And the focus is increasingly on inflation rather than real growth, and ways to hedge upside risks to inflation in this new cycle.”
But at least as it relates to monetary policy, a short-lived jump in inflation would not spur the Federal Reserve to immediately wind down its crisis-era support, numerous U.S. central bank officials recently reassured market participants. On Tuesday, Federal Reserve Vice Chair Richard Clarida told Yahoo Finance that "there will come a time in upcoming meetings" when the central bank would discuss scaling back asset purchases, but that "it is going to depend on the flow of data" – reaffirming the Fed is not on a set timeline when it came to rolling back policies that have supported the economic recovery and asset prices.
Stocks traded choppily as investors weighed these and other Fed comments against a mixed batch of economic data, which has offered unclear signals as to whether investors need be immediately disquieted by inflationary pressures. But as many strategists have said, the rise in inflation and eventually in interest rates will be an inevitable part of the recovery.
“You’re fighting the Fed actually if you think inflation’s going to get lower than that," Greg Staples, head of fixed income North America at DWS Group, told Yahoo Finance, referring to the Fed's stated goal of letting inflation run moderately above 2%. "[Fed Chair Jerome Powell] is really going to do everything he possibly can to stimulate it. And when the economy is overheating, you’re talking about potentially 6% growth in the first quarter, maybe 10% growth in the second quarter. We’ve got a lot of momentum here."
"He’s continuing to add stimulus on the monetary side, and then with Congress and the infrastructure plan on the fiscal side," he added. "So we think everything’s on a go for continued growth. And ultimately, that’s going to lead to stable more stable and systemic higher inflation, which will ultimately lead to higher rates."
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4:06 p.m. ET: Stocks drift higher, technology shares outperform as traders shake off inflation concerns
Here were the main moves in markets as of 4:06 p.m. ET:
2:00 p.m. ET: Bezos says Amazon's Andy Jassy will take over as CEO on July 5
Amazon CEO and founder Jeff Bezos announced on Wednesday that Andy Jassy will formally take over as CEO of the e-commerce giant on July 5. The announcement came during the company's annual shareholder meeting on Wednesday.
Amazon previously announced in February that Bezos would be stepping down as CEO later this year, and that Jassy, current head of Amazon Web Services cloud computing segment and long-time Amazon employee, would take over. Bezos is set to become executive chairman following the transition.
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1:55 p.m. ET: Stocks mixed, Nasdaq outperforms
Here's where markets were trading as of 1:55 p.m. ET:
12:08 p.m. ET: 'We still remain very positive on Europe': Strategist
Investors looking to diversify their portfolios outside of U.S. equities may find some opportunities still to be found in European stocks, with prospects of a strong recovery in the euro area increasing alongside a pick-up in vaccinations, some strategists said.
"Coming into the year, we had a tilt toward value segments of global equity markets, and that meant that we’ve had a relatively high allocation to European equities as well as in areas like Japan," Supriya Menon, Pictet Asset Management senior multi-asset strategist, told Yahoo Finance. "We’ve pared back Japan since then, but we still remain very positive on Europe and the euro area in particular."
"A few reasons for that: One is still there’s a valuation argument for Europe against the U.S., even if that gap has converged a bit as Europe has been the best-performing region among major reasons this year," she added. "But what we’re seeing now is increasing confidence in the recovery in Europe as the pace of vaccinations has ticked up markedly. We’re increasingly confident that the Europeans should be able to vaccinate say 70% of their population by the summer, at least with one dose. And that means that we’re more and more confident about the pace of the reopening.”
Menon added that less pressure has been seen in input prices for services in Europe, suggesting the region may not be experiencing as widespread inflationary concerns as has been the case in the U.S.
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11:01 a.m. ET: Ford shares leap after company says it will increase EV investment to $30 billion by 2025
Ford (F) announced on Wednesday that it is upping its investment in electric vehicles, sending shares soaring as the automaker boosts its spending in the burgeoning EV space.
Ford said it will spend more than $30 billion by 2025 on "accelerating investments and increasing planned total spending on electrification, including battery development," the company said in a statement Wednesday. This marks a 36% increase from the $22 billion the company planned on EV spending previously.
Ford also expects 40% of its global vehicle volume will be fully electric by 2030. The F-150 Lightning, the company's all-electric version of its lucrative pick-up, has already amassed 70,000 customer reservations since it was unveiled last week, the company added.
Shares of Ford jumped more than 8.5% in New York trading, adding to a year-to-date gain of 46% through Tuesday's close.
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9:40 a.m. ET: Dick's Sporting Goods shares jump 11% after company posts record quarterly earnings, raises guidance
Shares of Dick's Sporting Goods (DKS) jumped more than 11% after the company posted record first-quarter profit, with a surge in consumer spending and demand for in-person, outdoor activities driving strong results at the retailer.
First-quarter net sales rose 119% over last year and 52% over the same period in 2019 to reach $2.92 billion. These sales results drove first-quarter adjusted earnings per share to $3.41, far exceeding estimates for $1.15. The company also raised its full-year earnings per share outlook to between $7.05 and $7.68 on an unadjusted basis, sharply increasing this guidance from the $3.81 to $4.55 per share seen previously.
"The strength of our diverse category portfolio, supply chain, technology capabilities and omni-channel execution helped us continue to capitalize on strong consumer demand across golf, outdoor activities, home fitness and active lifestyle. We also saw a resurgence in our team sports business as kids began to get back out on the field after a year in which many youth sports activities were delayed or cancelled," Lauren Hobart, Dick's Sporting Goods president and CEO, said in a press statement. "Looking ahead, we remain very enthusiastic about our business and are pleased to increase our full year sales and earnings outlook."
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9:31 a.m. ET: Stocks open higher
Here's where markets were trading as of 9:31 a.m. ET:
8:41 a.m. ET: Amazon agrees to purchase MGM in $8.45 billion deal
Amazon (AMZN) announced Wednesday that it has agreed to purchase the Hollywood studio MGM Holdings for $8.45 billion, confirming days of media reports over the potential deal. The purchase is set to help bolster Amazon's streaming business as a competitor to other major players in the space like Netflix (NFLX) and Disney (DIS). MGM's library includes films such as the "James Bond" series, "Silence of the Lambs," and "The Pink Panther," as well as shows including "The Handmaid's Tale."
“The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team," Mike Hopkins, senior vice president of Prime Video and Amazon Studios. "It’s very exciting and provides so many opportunities for high-quality storytelling.”
Shares of Amazon were up 0.7% in early trading following the announcement.
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8:32 a.m. ET: Mortgage applications declined 4.2% last week, with homebuyers held back by 'lack of homes for sale and rapidly increasing home prices': MBA
Mortgage applications slid by the most since early April last week, with a decline in refinances dragging down overall loan volumes even as purchases ticked up for another week.
The Mortgage Bankers Association's (MBA) weekly market composite index for mortgage applications fell 4.2% during the week ended May 21. This followed a 1.2% rise during the prior week. The drop came as refinances fell by 7% week-on-week, bringing refinance volume down 9% from the same week last year. Purchases, however, were up 1% week-on-week on an unadjusted basis, though purchase applications were down 4% from the same week last year.
“Mortgage applications decreased last week as mortgage rates increased to 3.18%," Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. “While purchase activity was around 4% lower than a year ago, the comparison is to last spring’s large upswing in activity as pandemic-related lockdowns lifted. Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices.”
NEW YORK, NEW YORK - MAY 11: People walk by the New York Stock Exchange 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
