S&P 500 futures wobble after record high, with longest winning stretch in 2 years on the line

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MARKET SNAPSHOT

U.S. stock indexes on Tuesday morning were facing selling pressure, giving up slight early gains, with the Nasdaq Composite and S&P 500 struggling to add to their longest win streaks in more than two years.

Investors were parsing a report on wholesale inflation and news that industrial conglomerate General Electric was planning on splitting into three separate companies.

How are stock benchmarks trading?

  • The Dow Jones Industrial Average fell 105 points, or 0.3%, to 36,331.
  • The S&P 500 traded 6 points, or 0.1%, lower to reach around 4,695.
  • The Nasdaq Composite Index retreated 26 points, or 0.2%, to about 15,955.

Though the advance was modest, S&P 500 on Monday scored its eighth straight gain, its longest winning streak since April 2019. The Dow, S&P 500, Nasdaq Composite and Russell 2000 all finished at record highs after the House of Representatives late Friday passed infrastructure spending legislation that is expected to be signed into law by President Joe Biden.

What’s driving the market?

The term “melt up” is increasingly being used to describe the action in stocks.

“As scary as these heights feel, the market continues trading well. We’ve been solidly overbought for weeks, yet buyers keep throwing even more money at these record highs,” said Jani Ziedins, who authors the Cracked Market blog.

Read: ‘It’s a melt-up’: U.S. stocks are on an unusually strong run heading into the holidays

The Federal Reserve’s twice-a-year financial stability report said valuation measures are high across most asset classes. It noted that stock prices relative to earnings forecasts are at the upper end of its historical distribution, and the yields on Treasury securities, corporate bonds and leverage loans are at low levels relative to their history.

Meanwhile, traders will have to consider the possibility of a change in leadership at the Federal Reserve, after Bloomberg News reported that Fed. Gov Lael Brainard interviewed for the role currently held by Jerome Powell. Powell’s still considered likely to be nominated to serve a second term as chairman.

U.S. stocks looked to remain under pressure Tuesday after the October producer-price index rose 0.6%, in line with expectations. The pace of wholesale inflation over the past 12 months was flat at 8.6%. That is the highest level since the index was reconfigured in 2009, and likely one of the highest readings since the early 1980s.

Earlier, the National Federation of Independent Business said its gauge of small-business confidence slipped by 0.8 points to 98.2 last month, its lowest reading since March.

Which companies are in focus?

  • Shares of General Electric Co. were up 6% after the industrial conglomerate announced plans to split into three publicly traded companies.
  • AMC Entertainment Holdings Inc. late Monday reported quarterly results that beat expectations across the board. Shares of the popular meme stock were down around 8%.
  • Shares of Hertz Global Holdings Inc. were trading 5.5% loweron the Nasdaq Tuesday, after the car-rental company announced overnight that an upsized public offering of shares priced at the top end of the expected range. Hertz emerged from bankruptcy protection in July.
  • PayPal Holdings Inc. shares were down 10% after the payments company fell short of expectations with its holiday-quarter outlook Monday, while also announcing a new arrangement with Amazon.com Inc. through which Venmo users will be able to use the service as a checkout option on the e-commerce giant’s platform.
  • Shares of Roblox Corp. surged by about 30% after the social-gaming platform late Monday said its October performance would still top last year’s, despite a three-day outage over the Halloween weekend.

How are other markets faring?

  • The yield on the 10-year Treasury note BX:TMUBMUSD10Y fell 5.4 basis points to 1.44%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was off 0.1%.
  • Oil futures edged higher, with the U.S. benchmark up 1.2% at $82.87 a barrel. Gold futures edged up 0.1% at $1,830.30 an ounce.
  • The Stoxx Europe 600 edged up 0.1%, while London’s FTSE 100 was trading 0.2% lower.
  • The Shanghai Composite and Hong Kong’s Hang Seng Index each rose 0.2%, while Japan’s Nikkei 225 fell 0.8%.
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