S&P 500 and Dow retreat early Tuesday as Nasdaq Composite relinquishes perch at 16,000

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By Steve Goldstein and Mark DeCambre

GE shares rise after plan to split conglomerate into 3 companies

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?

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?

How are other markets faring?

-Steve Goldstein

 

(END) Dow Jones Newswires

11-09-21 1002ET

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