Stocks lower as inflation, retail sales data disappoints

BANGKOK — Stocks were moderately lower in midday trading Tuesday as investors reacted negatively to a report that once again showed inflation creeping higher as well as data that showed Americans slowed their spending last month.

The S&P 500 was down 0.3% as of 11:42 a.m. Eastern. The Dow Jones Industrial Average was down 169 points, or 0.5%, to 34,223 and the Nasdaq Composite was down 0.7% as well.

Technology stocks were the biggest drag on the market, though nearly every sector within the benchmark S&P 500 was lower. Energy companies had solid gains as the price of crude oil edged higher.

The Labor Department said Tuesday that wholesale prices, driven by rising food costs, increased 0.8% in May and by a unprecedented amount over the past year as the U.S. economy emerges from pandemic lockdowns and pushes inflation higher. The monthly gain in the producer price index, which measures inflation pressure before it reaches consumers, followed a 0.6% increase in April and a 1% jump in March.

Over the past 12 months, wholesale prices are up 6.6%, the largest 12-month increase on records going back to 2010.

“From a prices standpoint, we’re seeing inflationary pressure and we believe the jury is still out on the timing and extent of when we see a leveling or whether this new new normal of higher prices is cemented,” said Greg Bassuk, founder and CEO of AXS Investments.

Investors will hear from the Federal Reserve on Wednesday, when the nation’s central bank will finish up its regular policy meeting. The Fed is not expected to raise interest rates in response to higher inflation this month, but investors will be looking for any clues to see if Fed policymakers are becoming concerned about the recent inflationary data.

The market has remained choppy as Wall Street looks for clues as to just when the central bank could start tapering its bond purchases and other stimulus measures put in place to support the economy during the pandemic.

There are some limited signs that inflation may be cooling in some parts of the economy. Lumber and copper prices have dropped from their highs a few weeks ago. Copper is now trading at an eight-week low. Gold and copper miner Freeport-McMoRan fell 6.7%.

The yield on the U.S. 10-year Treasury note remained steady on Tuesday after the data, trading at 1.50%.

Meanwhile retail sales fell in May, dragged down by a decline in auto sales and a shift by Americans to spend more on vacations and other services instead of goods. Total sales dropped a seasonal adjusted 1.3% in May from the month before, the Commerce Department said Tuesday. Wall Street analysts expected a smaller decline of 0.5%.

Part of the decline in retail sales had to do with supply chain issues, most notably the lack of semiconductors, which has cut into the availability of electronics and automobiles for months now.