Dow Futures Rise, Tech Slips, Inflation Remains in Focus—and What Else Is Happening in the Stock Market Today

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Stocks had a bumpy May, but the S&P 500 closed out the month just above flat.

Ed Jones/AFP via Getty Images

Stocks wavered into the new month, with June trading set to start against the backdrop of familiar themes, including inflation and the pace of tightening monetary policy from the Federal Reserve.

Futures for the Dow Jones Industrial Average rose 100 points, or 0.3%, after the index retreated 222 points on Tuesday to close at 32,990. S&P 500 futures signaled a start around flat, with the tech-heavy Nasdaq poised to fall 0.2%.

Overseas, the pan-European Stoxx 600 slipped 0.3% and Hong Kong’s Hang Seng Index lost 0.6%.

“Dow Jones futures have unwound [Tuesday] losses,” noted Jeffrey Halley, an analyst at broker Oanda, “suggesting month-end flows played their part in the [Tuesday] retracement.”

After ending a turbulent month of May 0.6% higher, the S&P 500 and U.S. stocks looked to be beginning a new month of trading tentatively. 

Concerns around inflation at a multidecade high remain in focus—especially how high prices will inform the Fed’s path of tightening monetary policy. The risk as the central bank is expected to keep raising interest rates and start unwinding its bondholdings is that this could dent economic demand so much as to cause a recession.

“After some respite over the last couple of weeks, the last 24 hours have seen equities and bonds sell off in tandem once again as inflation fears cranked up another notch,” said Jim Reid, a strategist at Deutsche Bank .

Clouding the inflationary picture is a recent surge in oil prices after the European Union moved to partially ban Russian crude imports and as energy-hungry China emerges from strict Covid-19 lockdowns. Futures for U.S. benchmark West Texas Intermediate crude rose 1.5% to $116 a barrel, up from around $110 at the end of last week but below highs near $119 reached on Tuesday.

With inflation firmly on the radar, bond yields pushed higher, with the yield on the benchmark 10-year U.S. Treasury note nearing 2.9%, up from 2.75% at the end of last week. Higher yields add pressure to tech stocks in particular, because they discount the present value of future cash flows, and many tech stocks have valuations banking on profits years into the future. This in part explains the relative underperformance in Nasdaq futures on Wednesday.

Investors will get more detail on the growth picture in the day ahead with global manufacturing purchasing managers index data, as well as the ISM U.S. manufacturing reading for May. The Fed will also release its Beige Book—an anecdotal survey of economic conditions.

Write to Jack Denton at jack.denton@dowjones.com