Stocks took a breather in today’s session with all three major indices finishing the day in the red. The S&P 500, Nasdaq and Dow Jones Industrial Average were all down fractionally on Monday as investor jitters took hold while the Fed decides the fate of interest rates. The Fed’s two-day meeting began today and a statement is expected on Wednesday, in response to which the pendulum could swing either way on stocks.
One bright spot in the Dow was Boeing stock, which finished the day in the green. A nearly two-decade trade dispute between the U.S. and the EU involving subsidies for plane makers Boeing and Airbus finally came to an end, bringing some relief to the Dow stock.
Inflation Rearing Its Head
In the broader market, the pullback comes on the heels of record closes for both the S&P 500 and the Nasdaq on Monday. Investors got spooked by the latest retail sales data in which consumers did less shopping than anticipated, suggesting the economic recovery that was humming along has hit a snag.
Hedge fund manager Paul Tudor Jones warned on CNBC that if the Fed continues to stick its head in the sand on increasing prices, he would “go all-in on the inflation trades,” including:
On the economic front, retail sales for May fell 1.3% vs. expectations for a more modest 0.8% decline. Producer prices, meanwhile, are on the rise, which is fueling fears of inflation rearing its head in the economy.
Oil continues its bull run and surpassed USD 72 per barrel. Brent crude hasn’t seen this level in two years. The momentum in the oil price is expected to persist, with traders eyeing the possibility of USD 100 barrel oil once again.
The Fed’s statement will be the talk of the town on Wednesday afternoon. But that’s not the only piece of economic data that will be released. Housing starts for May will be out at 8:30 a.m. ET.
This metric fell in April as construction in the residential market slowed due to factors such as rising prices and a lumber shortage. Wells Fargo is predicting a recovery in May to a pace of 1.6 million units. Homebuilder Lennar reports its quarterly earnings tomorrow.