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Stocks mixed as focus turns to inflation data

US stocks were mixed in early trading on Tuesday, with techs serving as a bright spot while Wall Street kicked off a holiday-shortened week by focusing on a coming inflation report watched closely by the Federal Reserve.

The benchmark S&P 500 (^GSPC) hugged the flatline, while the tech-heavy Nasdaq Composite (^IXIC) added roughly 0.5% after solid closing gains on Friday. The Dow Jones Industrial Average (^DJI), which lists fewer tech names, slipped about 0.3%.

The major gauges are regrouping after a volatile week as traders return from the Memorial Day break. Stocks have been buffeted back and forth by two impulses: fading optimism for rate cuts on one hand, and high hopes for AI on the other. The latter is led by Nvidia (NVDA), whose shares continued a post-earnings tear, gaining 3% in premarket trading.

Investors are now firmly back on inflation watch, counting down to the release of the Federal Reserve’s preferred PCE gauge on Friday. Fed officials have sent out a drumbeat of warnings that data must show real cooling in inflation to trigger a policy shift, with Neel Kashkari the latest to join them.

Read more: How does the labor market affect inflation?

Those comments, alongside hotter-than-expected economic prints and hawkish Fed minutes, have prompted traders to once again scale back bets on interest rate cuts this year. Data chasers will get updates on first quarter GDP and consumer confidence later this week that could prove catalysts.

In other individual movers, GameStop (GME) stocks soared as much as 22% on Tuesday. The games retailer on Friday said it had brought in not far off $1 billion from a share sale during the meme rally earlier in May. Meanwhile, Apple (AAPL) rose following data showing iPhone sales in China jumped over 50% in April as retail partners cut prices.

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  • GameStop shares surge on completion of nearly $1 billion stock sale

    GameStop (GME) stock surged as much as 22% on Tuesday with shares opening at around $23. The moves come after the video game retailer said it raised almost $1 billion from its latest equity offering.

    Although shares are still well below the near $65 level reached earlier this month during a short-lived meme rally, the stock action reflects investor exuberance over the meme trade.

    Yahoo Finance’s Ines Ferré reports:

    “If this were a normal market, people would be a little freaked out,” Steve Sosnick, Interactive Brokers chief strategist told Yahoo Finance.

    He added, “You don’t sell stock into the market if you think your stock is undervalued. You do it when you think your stock is overvalued.”

    GameStop is a heavily shorted stock, with short interest just above 21% of the float.

    The company took advantage of mid-May’s unexpected meme rally, selling 45 million shares to bring in about $933 million, according to a Friday statement.

    GameStop said it intends to use the net proceeds for general corporate purposes, which may include acquisitions and investments.

    The offering was first announced on May 17 along with the company’s preliminary financial results, sending shares tanking as much as 30% that day.

    The offering was seen as a smart move by some Wall Street analysts amid the video-game retailer’s struggling financials. GameStop’s quarterly sales fell sharply from the year earlier period, according to its most recent earnings report.

  • San Diego sees highest gains in home prices

    As home prices notched a new all-time high in March, certain cities remained more susceptible to rising costs.

    Regionally, San Diego continued to report the highest year-over-year gain among the 20 major cities, rising 11.1% in March. New York and Cleveland also increased 9.2% and 8.8%, respectively.

    Elevated mortgage rates, high home prices, and limited housing stock have challenged homebuyers. In March, mortgage rates hovered around the mid-6% range. Last week, they fell below 7% for the first time since early April.

    Despite pent-up demand for homes, low inventory remains a problem, which hasn’t allowed home prices to ease. But that dynamic is expected to change.

    “Although we expect mortgage rates to drift lower in the next few years, we also expect inventory to gradually normalise which should help cool the market,” Thomas Ryan, North American economist at Capital Economics, wrote in a note to clients after the release. Ryan and his team expect home prices to climb by 3% in 2025 and 2.5% in 2026.

  • Home prices hit new records, data shows

    The seasonally adjusted S&P CoreLogic Case-Shiller national home price index (HPI) rose 0.3% month over month in March and jumped 6.5% on a year-over-year basis — the second strongest annual gain since late 2022, Oxford Economics said in a note to clients following the data’s release.

    “We expect home price growth to remain positive in the quarters ahead, with risks skewed to the upside,” Oxford Economics lead economist Bernard Yaros wrote. “Scarce supply in the resale market, a sturdy labor market, and pent-up demand from Millennials aging into their prime household-formation years argue for potentially firmer house price gains than in our baseline forecast.”

    According to the data, prices in the 20 biggest US metro areas hit another all-time high in March.

    (Source: Oxford Economics/Haver Analytics)

    (Source: Oxford Economics/Haver Analytics)

    Yaros added that although he expects “declines in mortgage rates as the first rate cut by the Federal Reserve comes into view” prices should continue to remain elevated amid a “historically tight” supply of homes for sale.

    Meanwhile, the seasonally adjusted Federal Housing Finance Agency (FHFA) House Price Index also rose during the month of March but at a slower pace compared to previous months. The index climbed just 0.1% after rising 1.2% month over month in February.

    “Though base effects have started to become less favorable for the FHFA index, it is still rising on an annual basis faster than it did for most of 2023,” Yaros said.

  • Consumer confidence rebounds for first time in 3 months

    Consumer confidence unexpectedly rose in May.

    The latest index reading from the Conference Board was 102, above 97.5 in April and higher than the 96 economists surveyed by Bloomberg had expected. The May reading ended three months of declines for the index.

    “Consumers’ assessment of current business conditions was slightly less positive than last month,” the Conference Board chief economist Dana Peterson said in the release. “However, the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get.'”

    Peterson added: “Fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index.”

  • Dow falls, Nasdaq gains at open

    US stocks opened mixed on Tuesday, with tech serving as a bright spot ahead of a critical inflation report due later this week.

    The benchmark S&P 500 (^GSPC) climbed about 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) added roughly 0.4% after solid closing gains on Friday. The Dow Jones Industrial Average (^DJI) was the biggest laggard of the morning, slipping 0.3%.

  • Foot Locker isn’t out of the woods

    Foot Locker (FL) has had a horrendous 12 months.

    Poor financial performances have led to surprisingly poor outlooks, sending shares down 16% in the past year.

    The Street is bracing for another dreadful quarter from the sneaker and sportswear retailer when it reports Thursday morning.

    Evercore ISI analyst Michael Binetti said investors should expect a “very tough quarter.” The company could warn again for the full year.

    He pointed to several reasons why:

    “In addition to pressured low-income consumers, we think key product launches like Air Max DN underperformed, and the recent Jordan 4 Industrial Blue is selling below MSRP in the resale channel ($185 vs $215 MSRP).”

  • Evercore ISI’s take on Trump 2.0 tariffs

    We have started to see Wall Street crunch the numbers on the economic impact of the new tariffs that former President Trump would be keen on implementing if he were to win a second term.

    Today Evercore ISI weighs in with its take:

    “Presidents rarely enact or implement the full entirety of any campaign idea and Trump in particular likes to use bold ideas as a launching off. Nevertheless, it is critical to understand what a dramatic starting point Trump has put forward as that has implications for where we could ultimately land. Taken at face value, the combination of the proposed 10% across-the-board tariff and the 60% China tariff would lead to an overall U.S. weighted average tariff rate of nearly 17%, the highest since the 1930s Smoot-Hawley era. On a static basis (i.e., not assuming any dynamic economic effects), tariffs would rise from 0.3% of GDP to 1.9% of GDP – an increase of more than $400 billion annually. Such a dramatic move would almost certainly lead to major retaliation by trading partners.”

    Are markets under-pricing a new Trump trade war?

    Are markets under-pricing a new Trump trade war? (EvercoreISI)

Read More: Stocks mixed as focus turns to inflation data

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