By Damian J. Troise and Stan Choe
U.S. stocks slipped on Monday, tacking more losses onto last week’s stumble, as worries about inflation continue to dog Wall Street.
The S&P 500 dipped 10.56, or 0.3%, to 4,163.29, with tech stocks and other former market darlings once again taking the brunt of the losses. The benchmark index is coming off a 1.4% weekly drop from its record high, which would have been even worse if not for a late rebound.
The Dow Jones Industrial Average fell 54.34, or 0.2%, to 34,327.79, while the Nasdaq composite lost 50.93, or 0.4%, to 13,379.05.
Most stocks in the S&P 500 fell, but pockets of strength dotted around the market helped limit the damage. Energy stocks jumped as the price of crude oil rose, while producers of metals and other raw materials also climbed. The Russell 2000 index of smaller stocks inched up 2.49, or 0.1%, to 2,227.12.
They’re the latest back-and-forth eddies for a market swept up in worries about whether rising inflation will prove to be only temporary or longer lasting, as well as enthusiasm about a recovering economy. Prices are rising for everything from auto insurance to restaurant meals as the economy leaps out of last year's pandemic-induced coma.
If inflation does end up being more than a blip, the fear is that the Federal Reserve will have to dial back the extensive support it’s providing to markets. That includes record-low interest rates and the monthly purchase of $120 billion in bonds meant to goose the job market and economy.
The yield on the 10-year Treasury has shot higher this year amid the inflation fears. It was at 1.65% late Monday, up from 1.63% at the end of last week. It began the year close to 0.90%.
Higher interest rates drag on most of the stock market, but they hit particularly hard on stocks seen as the most expensive and those bid up for profits expected far in the future.
That has put extra pressure on tech stocks and companies promising the allure of big growth, which have been leading the market for years. Apple, Microsoft and Tesla were three of the heaviest weights on the S&P 500 Monday, falling between 0.9% and 2.2%.
In recent weeks, blowout profit reports from tech titans and much of the rest of corporate America have helped validate the huge run stocks have been on for more than a year. The economy continues to strengthen as COVID-19 vaccinations roll out, and the S&P 500 roared to an 11.3% gain in the first four months of the year. That’s a bigger gain than the market has had in half of the last 20 full years.
“History says whenever we’ve had such a strong start to the year we tend to take a break and digest some of those gains,” said Sam Stovall, chief investment strategist at CFRA. “In many ways this is fairly natural.”
For all the worries about inflation, many professional investors are echoing the Federal Reserve in saying that they expect rising prices to remain only “transitory.” Many analysts along Wall Street also expect the strong profit growth for companies to continue through the year as the economy and job market improve. That should help to support stock prices, though it may not give a big further boost after shares surged last year when profits cratered.
Steelmakers made some of the market's strongest gains on Monday following the suspension of key measures in a tariff dispute between the U.S. and European Union. Nucor rose 3.7%, and U.S. Steel rose 3.4%.
AT&T slipped 2.7%, and Class A shares of Discovery dropped 5% after the companies announced a $43 billion deal that will combine several major media and streaming entertainment businesses. The new company folds in AT&T’s CNN and HBO channels with Discovery’s Food Network and HGTV.
European stock markets were mostly lower, while Asian markets ended mixed.
Updated on May 17, 2021, at 4:49 p.m. ET.