Wall Street had a tumultuous day, with the Dow down 115 points, or 0.3%, on Monday, after an earlier drop of more than 400 points. However, the S&P 500 managed to climb 0.1% and the Nasdaq Composite rose 0.6%, marking the first trading day of June. This comes after the Institute for Supply Management's manufacturing index fell to 48.7 in May from 49.2 in April, indicating signs of contraction in US manufacturing.
Investors have recently responded to weaker-than-expected data with optimism, hoping it could hasten the start of the Federal Reserve's policy easing. However, the current reaction to the soft data is one of fear, according to Jos Torres, senior economist at Interactive Brokers.
US Treasury yields also fell on Monday, with the 10-year yield falling to 4.4. Investors are grappling with data that suggests inflation is lingering as the economy cools. That has raised concerns that the Federal Reserve could keep interest rates higher for longer than expected, causing stocks to fluctuate. Despite this, all the major stock indexes in May achieved their sixth winning month in seven.
The personal consumption expenditure price index, the Federal Reserve's preferred measure of inflation, indicated that inflation remained high in March. GDP data released last Thursday showed that the US economy expanded at a slower pace earlier this year than initially reported. This was largely due to a downward revision in consumer spending.
“I don't think we're going into a recession, but we're normalizing,” said Keith Lerner, chief market strategist at Truist.
In other news, the New York Stock Exchange resolved a technical issue that had halted trading in some stocks and sent Berkshire Hathaway shares down 99.97%. Meanwhile, GameStop shares jumped 21% after a Reddit post by Keith Gill, aka Roaring Kitty, showed a screenshot of a stake in the video game stock worth nearly $116 million . Shares of GameStop had jumped more than 75% on the day before it cut its earnings.
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