The stock market moved lower on Tuesday, failing to build on recent gains after its best week since November 2020, as widespread selling pressure resumed amid growing fears about surging inflation leading to a looming recession.
Stocks fell on the last trading day of the month: The Dow Jones Industrial Average lost 0.7%, over 200 points, while the S&P 500 dropped 0.6% and the tech-heavy Nasdaq Composite 0.4%.
The Dow and S&P 500 are coming off their best weekly gains since November 2020 after snapping a seven-week losing streak last Friday, as recession fears cooled slightly thanks to positive economic data showing inflation may be somewhat moderating.
Concerns about inflation and a potential economic slowdown resurfaced on Tuesday after a flurry of negative headlines out of Europe including euro zone inflation surging 8.1% in May, a new record high for a seventh month in a row.
Oil prices surged following the European Union’s decision to ban more crude imports from Russia, which also raised fears about inflation: US benchmark West Texas Intermediate rose to around $119 per barrel, while international benchmark Brent crude jumped to $124 per barrel.
Energy stocks jumped as a result on Tuesday—at one point the only positive sector in the S&P 500—as shares of Occidental Petroleum, Marathon Oil and Diamondback Energy all rose 3% or more.
In a new note, Morgan Stanley strategist Mike Wilson warned that high inflation and a hawkish Federal Reserve would lead to a “fire and ice” scenario for stocks, with a major correction looming later this summer despite last week’s “bear market rally.”