The S&P 500 dipped on Thursday as a raft of upbeat data fanned fears of rising inflation, eclipsing reports that President Joe Biden has offered to scrap his proposed corporate tax hike.
Major stock indexes pared losses, with the Dow rising 0.1% after reports of the major concession by the Democratic president. Biden's offer came amid talks with Republicans on an infrastructure package, a source familiar with the matter said."The tax structure now has gone from headwind to a tailwind," said Rob Sechan, managing partner and co-founder of NewEdge Wealth.
A better-than-expected U.S. weekly unemployment report and private payrolls numbers for May pointed to strengthening conditions in the labor market, while a measure of service sector activity increased to a record high, pointing to a robust economic rebound.The strong data could force the Federal Reserve to pare back its crisis support sooner than expected, despite central bank officials' reassurances to the contrary.
"The robust jobs data provides a challenge to the inflation narrative as better jobs result in higher spending which would further contribute to the inflationary trends," said Sean O’hara, president of Pacer ETFs. Adding to fears over easing support was the Fed's announcement on Wednesday that it will wind down its emergency corporate credit facility.
Analysts at Bank of America cautioned that the news is "very negative for risk assets" and said the U.S. central bank is closer to normalizing monetary policy than markets expect.
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