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Stock Market Today: 2% Drop as Inflation, Fed, Oil Concerns Weigh on Traders

Investing.com -- Markets dropped after a promising start to the day, as risk assets suffered on Tuesday amidst signs that oil's high price is stabilizing and that the Fed is not interested in slowing down.

The S&P 500 dropped 2% on the day to 3822, while the Dow Jones Industrial Average dropped 1.6%. The Nasdaq Composite took the biggest hit, dropping 3%, a sign that the concerns of inflation and lagging growth predominated in Tuesday trading.

One of the blows to bullish hopes was cold water from the Fed in the form of pledges to continue to curb inflation. In an interview on LinkedIn, San Francisco Fed President Mary Daly said, "Many are worried that the Fed might be acting too aggressively and maybe tip the economy into recession. I am myself worried that left unbridled, inflation would be a major constraint and threat to the U.S economy and continued expansion." New York Federal Reserve Bank President John Williams and St. Louis Fed President James Bullard echoed those statements in separate interviews.

As a reminder of that potentially unbridled inflation, both crude oil and Brent oil closed up over 2% today. The commodity jumped on reports that gulf oil producers are near "max outputs", meaning no supply side solution is poised to come to the rescue.

And while consumer confidence surveys have come into some question among market participants, the Conference Board consumer survey missed expectations and set a 15-month low, dating back to pre-Covid vaccine rollouts in the U.S., a reminder of how inflation is weighing on sentiment.

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Gold Up, Dollar Down as Asian Risk Appetite Grows

Investing.com – Gold was up on Monday morning in Asia, firming in volatile trading. A weaker dollar gave the yellow metal a boost, but a move towards riskier assets in Asia capped gains.

Gold futures gained 0.41% to $1,858.85 by 12:47 AM ET (4:47 AM GMT).

“With the three-day holiday in the U.S., which means lower liquidity than usual, and a lack of top-tier data until Wednesday, we may find that gold will remain nailed to its tight range around $1,850 unless a new catalyst arrives,” City Index senior market analyst Matt Simpson told Reuters.

Federal government offices, stock and bond markets, and the Federal Reserve will be closed for the Memorial Day holiday in the U.S. on Monday.

Gold has had a mostly positive showing since hitting an over three-month low of $1,786.60 per ounce on May 16, 2022. It is set for a second consecutive monthly fall for the first time since March 2021, down about 2.4% so far.

In other precious markets, silver edged up 0.1%, platinum firmed 0.1% to $954.51, and palladium rose 0.8%.

Dollar resumes slide as stock markets tentatively pick up

LONDON (Reuters) -The U.S. dollar resumed its slide on Monday as risk appetite across markets tentatively strengthened, supported by encouraging economic data and bets that the Federal Reserve will tighten policy at a slower pace.

The dollar index - which tracks the greenback against six major rivals - is on track for its first monthly drop in five, as the safe-haven currency loses steam after a breakneck start to the year.

The dollar index is on track for a more-than 1.5% drop in May - although it remains up about 6% on the year. It was last down 0.2% on the day at 101.510.

Trade was likely to be light through Monday as U.S. stock and bond markets close for the Memorial Day public holiday.

Data on Friday showed that U.S. consumer spending rose more than expected in April as households boosted purchases of goods and services, and the rise in inflation slowed.

Analysts said the encouraging data, coupled with bets on a more cautious tightening path by the Fed, was weakening the dollar.

World share markets rose on Monday as easing COVID-19 restrictions and new stimulus in China helped sustain last week's rebound.

The offshore-traded Chinese yuan strengthened as much as 1% versus the dollar on the reopening news, and was last up 0.6% at 6.6802 yuan per dollar.