US stocks fell Tuesday as momentum on Wall Street faded after the S&P 500’s best week since 2020.
The Dow Jones Industrial Average lost about 270 points, or 0.8%. The S&P 500 lost 0.9%. The Nasdaq Composite fell 0.8%.
After a holiday break on Monday, US stocks are on track to close out the month. The Dow and the S&P 500 both changed little in May, while the Nasdaq is about 2% off.
Tuesday’s moves came amid mounting concerns that rising inflation in the US and around the world could slow economic growth. In Europe, inflation in the eurozone reached an all-time high for the seventh month in a row, rising 8.1% in May. In the US, the main consumer spending price index – the inflation gauge favored by the Fed – rose 4.9% in April from a year ago.
“It will be difficult to reverse the fire and ice,” Morgan Stanley’s Mike Wilson said in a note on Tuesday. “Higher inflation and slower growth are now the consensus, but that doesn’t mean it’s been fully discounted. The more stock prices rise, the more aggressive the Fed will be.”
Industrial stocks related to the economic cycle fell Tuesday and weighed on the Dow. 3M, Honeywell and Boeing each lost about 2%.
Healthcare was among the worst-performing S&P sectors, falling 1.4% Tuesday. Johnson & Johnson led the Dow down, falling nearly 2%.
Concerns about higher inflation also increased as oil prices rose after the European Union agreed to ban most crude imports from Russia. West Texas Intermediate futures were up about 3% to over $118 a barrel. Brent oil, the global oil benchmark, rose more than 1% to nearly $124 a barrel.
Energy stocks were the top sector on Tuesday. Marathon Oil was up more than 4%, while Diamondback Energy was up about 3% and Devon Energy was up more than 2%.
The Dow and S&P 500 posted their best weekly gains since November 2020. The blue chip average closed 6.2% for the week, ending an eight-week loss streak. The S&P 500 gained 6.5% and the Nasdaq rose 6.8% this week, finishing positive after seven consecutive weeks of losses. Solid retail profits, as well as an inflation report showing prices could fall, lifted investor sentiment.
Still, the stocks remain well above their highs. The Dow is about 11% below its record, the S&P 500 is down more than 14% and the Nasdaq is down about 25%.
“Bear markets are incredibly difficult to navigate because they are inherently volatile and prone to sharp upward rallies,” Wolfe Research’s Chris Senyek said in a note Tuesday.
Traders will be looking at more quarterly company earnings during the short holiday week. Salesforce, HP and Victoria’s Secret are expected to report earnings after the bell on Tuesday.