U.S. stocks on Tuesday struggled for traction, as market participants digested some conflicting signals. Strong labor market data countered dovish comments on inflation from Federal Reserve chair Jerome Powell.
Wall Street’s three major averages have seesawed in the second trading session of H2 2024. The tech-heavy Nasdaq Composite (COMP:IND) was last up 0.52% to 17,972.13 points in afternoon trade, while the benchmark S&P 500 (SP500) was higher by 0.23% to 5,487.82 points. The blue-chip Dow (DJI) had slipped 0.05% to 39,149.69 points.
Of the 11 S&P sectors, seven were in the green.
Shortly after the opening bell, Powell spoke at a panel at the European Central Bank’s (ECB) annual Forum on Central Banking in Sintra, Portugal. The central bank chief said U.S. inflation readings were showing signs of “resuming” a “disinflationary trend.” He also reiterated that policymakers still want more confidence that things were heading in the right direction.
“Powell didn’t say anything particularly noteworthy, although he maintained a fairly dovish tone. He noted there has been ‘quite a bit of progress’ on inflation, ‘we are getting back on a disinflationary path’, and recent CPI/PCE data ‘represents significant progress’,” Wolfe Research’s Stephanie Roth said.
“He stopped short of declaring victory on inflation, noting ‘we need to see more data like we’ve been seeing recently’ in-line with recent comments. Although the moderator, CNBC’s Sara Eisen, was fishing for dovish answers with her questions, Powell didn’t say anything notably more dovish,” Roth added.
Countering the positivity sparked by Powell’s comments was the latest Job Openings and Labor Turnover Summary (JOLTS). According to the U.S. Bureau of Labor Statistics, job openings unexpectedly rose to 8.140M in May from April’s revised figure of 7.919M. Meanwhile, the quits rate held steady at 2.2% in May.
The JOLTS report, coming ahead of Friday’s nonfarm payrolls data, pointed to continued resilience in the labor market. That factor, along with inflation, has been one of the primary reasons for the Fed holding interest rates steady at a 23-year high and not gaining enough confidence yet to ease monetary policy.
“Although the (May JOLTS) showed slightly more job openings than expected (8.14m vs 7.95m consensus), the broader underlying downtrends remained in place. The pace of hiring continued to cool, but so did the pace of separations (e.g., layoffs, quits, retirements),” Parker Ross, global chief economist at Arch Capital Group, said on X (formerly Twitter).
“While the pace of hiring typically rises during expansions, this cycle has instead been driven by separations slowing alongside slower hiring since early 2022. This leaves the economy in a relatively fragile state, where any meaningful deceleration in hiring or acceleration in separations could lead to a quick downshift in job growth,” Ross added.
Turning to the fixed-income markets, U.S. Treasury yields were little changed. The 30-year (US30Y) and 10-year yields (US10Y) were both flat at 4.63% and 4.45%, respectively. The shorter-end, more rate-sensitive 2-year yield (US2Y) was down nearly 1 basis point to 4.75%. Notably, the yield curve between the US2Y and the US10Y has now narrowed to its tightest point in two months.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Looking at Tuesday’s active movers, Tesla (TSLA) dominated headlines. The electric vehicle giant’s stock surged ~9% after its quarterly deliveries beat consensus estimates. Ahead of the report, analysts had been reeling in their expectations due to concerns over consumer demand, as well as registration data from Europe and China.