On Tuesday, the U.S. stocks finished lower, as a steep drop in telecom stocks and poor housing starts data overshadowed Walmart and Home Depot’s better-than-expected results.
AT&T Inc (T.N) was one of the S&P 500’s largest percentage decliners. It continued to fall after the telecoms company announced on Monday, that it would reduce its dividend payout ratio as a result of its $43 billion media asset deal with Discovery Inc. (DISCA.O). T-Mobile (TMUS.O) and Verizon Communications (VZ.N), both saw their stock prices fall.
The three major indexes started the day higher after Walmart (WMT.N), the world’s largest retailer, lifted its full-year earnings outlook and Home Depot (HD.N) posted quarterly same-store sales that exceeded expectations.
“Both the private sector and the consumer sector are represented by these symbols. You can’t have blowout profits at Walmart and Home Depot without the customer speeding up spending stimulus checks, embracing ecommerce, and returning to stores.” Ross Mayfield, an investment analyst at Baird in Louisville, Kentucky, said. “And right now, a lot of the bull thesis for the market is still focused on a very good economic reopening,” he added.
Despite its good performance, Home Depot’s stock fell due to a lack of confidence in the company’s outlook and the housing numbers. According to the most recent data, homebuilding in the United States dropped more than anticipated in April, owing to rising lumber and other material prices.
The Dow Jones Industrial Average (.DJI) dropped 267.26 points, or 0.78 percent, to 34,060.53, the S&P 500 (.SPX) dropped 35.55 points, or 0.85 percent, to 4,127.74, and the Nasdaq Composite (.IXIC) fell 75.41 points, or 0.56 percent, to 13,303.64.
Following an increase in volatility last week following strong inflation readings, Wall Street has been volatile in recent days, with investors concerned that an overheating economy may cause the Federal Reserve to reduce its monetary support.
Fund managers recently reduced their overweight holdings in tech stocks to a three-year low, according to a Bank of America report, as recession worries made growth stocks prone to a pullback, and became bullish on UK stocks for the very first time in seven years.
Unprecedented stimulus initiatives to combat the pandemic-induced recession have now triggered concerns about inflation, which was named the biggest tail risk for markets in the BofA survey.
Consumer prices in the United States unexpectedly increased by the most in nearly 12 years in April, raising fears that the Federal Reserve would have to increase rates earlier than anticipated.
This benefits UK stock indices, which are heavily weighted in stocks that thrive in a rising rate setting, such as banks, miners, and energy companies.
According to BofA’s survey of 215 fund managers with $625 billion in assets under control, allocation to UK stocks reached its highest level since March 2014, aided by the clearing of the Brexit fog and an economy poised to reopen completely after a couple of strict COVID-19 lockdowns.
Last year, Britain officially exited the European Union, putting an end to years of confusion.
