Stocks recovered from earlier losses on Monday, with the Dow Jones Industrial Average rebounding from a drop of over 400 points to close down 115 points, or 0.3%. The S&P 500 managed to eke out a slight gain of 0.1%, while the Nasdaq Composite surged by 0.6%, concluding the first trading day of June on a mixed note.
These movements followed the release of the Institute for Supply Management manufacturing index for May, which dipped to 48.7% from April’s 49.2%. A figure below 50 indicates a contraction in the US manufacturing sector, while a reading above signals expansion.
Analysts observed a potential shift in sentiment among investors. José Torres, a senior economist at Interactive Brokers, noted in a Monday commentary that recent market reactions suggest a departure from the trend of celebrating weaker economic data in anticipation of looser monetary policy from the Federal Reserve. Instead, softer data is now met with apprehension.
The decline in stock prices was accompanied by a fall in US Treasury yields, with the 10-year yield dropping to 4.4% by 3 pm ET, according to Tradeweb.
Investors have been wrestling with conflicting economic indicators, grappling with persistent inflation alongside signs of a cooling economy. Concerns have arisen that the Federal Reserve might maintain higher interest rates for an extended period, triggering volatility in the stock market. Nonetheless, May marked the sixth winning month in seven for all major stock indexes.
The latest data on inflation, as indicated by the Personal Consumption Expenditures price index, revealed that inflation remained elevated in March, with a 0.3% monthly increase and a 2.7% rise from the previous year, according to the Commerce Department.
Furthermore, revised gross domestic product figures released last Thursday painted a less robust picture of the US economy’s performance in the first quarter. The Commerce Department’s second estimate pegged first-quarter GDP growth at an annualized rate of 1.3%, below the initial estimate of 1.6%, primarily due to downward revisions in consumer spending.
Keith Lerner, chief market strategist at Truist, expressed a belief that the economy is undergoing a period of normalization rather than heading into a recession.
In other news, the New York Stock Exchange confirmed on Monday the resolution of a technical glitch that had interrupted trading for certain stocks, causing Berkshire Hathaway shares to briefly plummet by 99.97%.
GameStop shares experienced a surge of 21% on Monday following a Reddit post by Keith Gill, known as “Roaring Kitty,” revealing a substantial stake in the video game retailer valued at nearly $116 million. Earlier in the day, GameStop shares had spiked by over 75% before retracing some of those gains.
