Stocks ticked up Tuesday to regain footing after a meandering session a day earlier, with traders weighing a stronger economic backdrop against prospects of higher inflation.
The S&P 500 came within striking distance of its all-time high shortly after market open. The Dow fluctuated between small gains and losses, while the Nasdaq traded about 0.5% higher.
More signs of labor shortages rolled in on Tuesday, as employers scrambled to find qualified workers to fill positions and meet surging demand during the post-pandemic recovery. The Bureau of Labor Statistics reported that job openings soared to a record more than 9 million in April. And a separate new sentiment survey showed a record 48% of small businesses reported that they had unfilled job openings last month.
Investors this week have also been digesting more signals from officials over the path forward for monetary and fiscal policies as the economy rebounds from the pandemic, and what these might suggest for interest rates and corporate earnings. Treasury Secretary Janet Yellen said over the weekend that higher interest rates "would actually be a plus for society's point of view and the Fed's point of view," according to an interview with Bloomberg.
Traders, however, have been less convinced. Higher interest rates could weigh on stock valuations, and additional corporate tax reforms could additionally cut into profits for major companies. Amazon (AMZN) shares fell on Monday following a report that Group of Seven finance ministers were looking to include the e-commerce giant in new global tax proposal. And investors continue to eye negotiations between President Joe Biden and members of Congress for his multi-trillion-dollar infrastructure proposal, which would likely be funded in part by increased corporate taxes and may come in the form of a raised corporate tax floor.
Still, some strategists suggested investors' concerns around the headline issues of inflation and tax reform may be overblown. A solid economic growth backdrop may help outweigh some of these rate or policy headwinds.
“We think investors are getting a bit too pessimistic as far as the outlook given inflation concerns and the increasing tax environment,” Jon Adams, BMO Global Asset Management strategist, told Yahoo Finance. “The backdrop of very supportive policy environment, strengthening economy, and very strong earnings momentum really portend gains for equities as we head toward the second half of the year.”
“We really prefer to position investors toward value with a tilt there, a tilt toward small caps. We think those areas of the equity spectrum perform well in rising inflationary periods,” he added. “We think equities are a pretty good hedge against potentially higher inflation, and we’re not as worried about the corporate tax environment given the headlines over the last week or so.”
10:20 a.m. ET: Apple shares gain 1% as analysts strike upbeat tone on newly unveiled software updates
Apple (AAPL) shares rose on Tuesday after the company unveiled a number of new software updates during its virtual Worldwide Developers Conference a day earlier. During the event, the company unveiled the latest version of iOS, or iOS 15, and other updates including new features for the Apple Watch.
Wall Street analysts were constructive on what these updates would mean for the company's business. Analysts were especially positive on Apple's focus on privacy with its latest updates, with the company allowing users to prevent third-parties from tracking online activity and adding enhanced privacy during web-browsing with iCloud+.
Here's what some analysts had to say about the announcements in notes wrapping the event:
"The company continues to highlight its focus on privacy, including new announcements on the iCloud+ service offering enhanced internet privacy for paid users. We also note new multitasking updates for iPad which continue to blur the line vs. Macbooks, as well as new developer tools which make it simpler to build, test and deliver apps on iPad. Widely expected new Macbook Pro hardware was conspicuously missing from the presentation pushing the likely launch of the next version of Apple’s M-series chips to this Fall." – Rod Hall, Goldman Sachs
"iOS 15 was introduced and is very focused around new device privacy protections, various notifications/lock screen changes, and a revamped iMessage feature set. This follows the iOS 14.5 release which has doubled down on privacy features for the consumer at a time which Apple has directly put itself on a collision course with Facebook around the ability for users to block data tracking." – Dan Ives, Wedbush
"Overall, the event was largely as expected and we’d characterize the announcements as more incremental in nature, though unique features enabled by Apple’s tightly integrated HW/SW/Services stack remain front-and-center ... For the stock, the focus remains on the sustainability of iPhone strength heading into year 2 of 5G as well as Mac/iPad/Services normalization." – Matthew Cabral, Credit Suisse
10:03 a.m. ET: Job openings surged to record high in April as labor shortages deepened
Job openings soared to a fresh record in April, with already pronounced labor shortages during the economic recovery deepening further.
The U.S. Bureau of Labor Statistics reported Tuesday that job openings totaled 9.286 million in April, marking the highest level on record, based on data going back to 2000. This rose from March's 8.288 million job openings, which were upwardly revised from the 8.123 million previously reported. Consensus economists were looking for ob openings to total 8.2 million in April, according to Bloomberg data.
The largest increases in job openings were in the accommodation and food services industries at 349,000. Other services also saw job openings rise by 115,000, while durable goods manufacturing openings increased by 78,000.
9:32 a.m. ET: Stocks open mostly higher, tech stocks lead
The Nasdaq outperformed just after market open Tuesday morning as technology stocks outperformed. The index rose about 0.5%, versus the S&P 500's gain of just about 0.1%. The blue-chip index came within two points of its all-time high of 4,238.04.
The Dow edged slightly lower. The small-cap Russell 2000 index advanced 1.4%, while U.S. crude oil and gold prices ticked down.
8:15 a.m. ET: Tesla shares rise after China-made vehicle sales resurge in May
Shares of Tesla (TSLA) jumped 3% during the early session Tuesday morning after China Passenger Car Association data showed the company's sales of vehicles produced in China rebounded in May.
Tesla's deliveries to Chinese customers totaled 21,936 in May, which nearly doubled its sum from April but came in below its 36,000 in March.
The company also sold a total of 33,463 of its electric vehicles produced in China in May when including exports. This marked a 29% increase compared to April.
"Importantly the domestic cars sold in country were north of 20k as Tesla appears to have handled the shaky China PR issues (safety, big brother is watching-Beijing) and turbulence well as demand rebounded well ahead of expectations," Wedbush analyst Dan Ives wrote in a note Tuesday morning.
"We believe starting in the month of June Tesla will be on a 300k run-rate for deliveries in China as the growth story appears back on track in this linchpin region despite the skeptics and haters piling on from the month of April, which we continue to view as an anomaly rather than the norm," he added.
7:33 a.m. ET: Small business optimism unexpectedly falls in May as unfilled jobs hit record high, labor costs rise
Optimism among small business owners ticked down in May after three straight months of increases, with challenges in finding qualified workers for open roles weighing on sentiment despite easing social distancing standards.
The headline small business optimism index from the National Federation of Independent Business (NFIB) fell to 99.6 in May from 99.8 a month earlier. Consensus economists were looking for a rise to 101.0, according to Bloomberg data.
The drip came as a record high 48% of small business owners reported unfilled job openings last month. This marked a fourth straight month of record high readings for job openings.
“Small business owners are struggling at record levels trying to get workers back in open positions,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Owners are offering higher wages to try to remedy the labor shortage problem. Ultimately, higher labor costs are being passed on to customers in higher selling prices.”
7:24 a.m. ET Tuesday: Stock futures struggle for direction
Here's where markets were trading Tuesday morning:
S&P 500 futures (ES=F): 4,231.25, +5.75 points (+0.14%)
Dow futures (YM=F): 34,600.00, -16 points (-0.05%)
Nasdaq futures (NQ=F): 13,861.25, +57 points (+0.41%)
Crude (CL=F): -$0.65 (-0.94%) to $68.58 a barrel
Gold (GC=F): -$0.20 (-0.01%) to $1,898.60 per ounce
10-year Treasury (^TNX): -1.5 bps to yield 1.555%
6:10 p.m. ET Monday: Stock futures drift as S&P 500 closes in on record
Here's where markets were trading Monday evening:
S&P 500 futures (ES=F): 4,226.5, +1 point (+0.02%)
Dow futures (YM=F): 34,610.00, -6 points (-0.02%)
Nasdaq futures (NQ=F): 13,820.5, +16.25 points (+0.12%)
FILE - In this March 23, 2021 file photo, the Fearless Girl statue stands in front of the New York Stock Exchange in New York's Financial District. Stocks are opening broadly higher on Wall Street, getting June off to a strong start as traders returned from the Memorial Day holiday in the U.S. (AP Photo/Mary Altaffer, File)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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