Stock Indexes Veer Lower

Major U.S. indexes veered lower on Wall Street in Wednesday afternoon trading as a pullback in banks and industrial companies offset gains elsewhere in the market. Stocks championed by hordes of online retail investors, the “meme” stocks as they have become known, were volatile once again.

The S&P 500 fell 0.1% as of 3:37 p.m. Eastern. The Dow Jones Industrial Average fell 126 points, or 0.4%, to 34,474 and the Nasdaq Composite gave up an early gain, dropping less than 0.1%.

The tech-heavy Nasdaq was lifted by the same Big Tech companies that have pushed that index generally higher for the last 18 months. Microsoft rose 0.5% and Amazon added 0.6%.

Several health care companies made solid gains. Merck rose 2.2% after announcing a supply agreement with the U.S. and Canada for a potential COVID-19 treatment. AbbVie gained 1.4% after announcing a collaboration with Caraway Therapeutics to make treatments for Parkinson’s disease and other neurodegenerative disorders.

Treasury yields slipped. The yield on the 10-year Treasury fell to 1.49% from 1.52% late Tuesday. The falling yields broadly weighed down banks, which rely on higher yields to charge more lucrative interest on loans. JPMorgan slid 1.2% and Citigroup fell 1%.

Investors continue to focus a significant amount of attention on inflation. China’s producer price index, which measures prices of raw goods and services, jumped 9% from a year earlier in May, the fastest increase since 2008 and above analysts’ forecasts. Surging prices for oil and other commodities and manufacturing components such as semiconductors were the main factor behind the jump in producer prices there. 

Aside from surging prices of raw materials, fuel and other items needed for manufacturing, factories are struggling to keep up with demand as the pandemic recedes in many places. That has pushed up prices of everything from food to household staples.

Investors will get closely watched U.S. inflation data on Thursday and how it might impact ultra-low interest rates and other market-supporting policies.

The market has been relatively constrained over the last several days and investors have parsed any data to judge whether rising inflation will be temporary, as the Federal Reserve thinks, or more permanent. 

The Labor Department’s release of the consumer price index Thursday will add to that discussion, particularly since it comes shortly before the Federal Reserve’s next meeting on interest rate policy next week.

“Is it transitory, or is the Fed behind the curve?” said Sal Bruno, chief investment officer at IndexIQ. “That is going to be a lot of the discussion tomorrow with people reading into which way we’re going.”

Elsewhere in the market, volatility in stocks embraced by investors using online forums like Reddit continued for another day Wednesday. Clover Health fell 21.5% while AMC Entertainment sank 7.4%.

The original “meme” stock, GameStop, will report its quarterly results after the closing bell on Wednesday. The company has tried to avoid its attachment to the online activist investor community as best as it can. It’s last quarterly conference call with investors lasted 15 minutes and the company took zero questions. The stock was up 3.8% in afternoon trading.

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