Published - May 9th, 2023 @ 03:43 PM (CET)
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U.S. stocks experienced a pause on Monday following a robust rally in the previous session, with investors now setting their sights on crucial inflation data scheduled to be released later this week. Throughout the day, the stock market struggled to find a clear direction in light of disappointing earnings from Tyson Foods and Catalent, as well as a fleeting rebound in regional banks.

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Catalent Inc's shares plunged 25.74% as the contract drug manufacturer reported lower revenue and core profit for 2023. Tyson Foods also experienced a significant drop, with shares plummeting 16.41% due to a surprising second-quarter loss and a reduced annual revenue forecast. The rebound in regional lenders' shares lost momentum by midday, with the KBW Regional Banking Index falling 2.82% after experiencing its best single-day performance in seven weeks on Friday.

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The S&P 500 inched up by 1.87 points, or 0.05%, to 4,138.12, while the Nasdaq Composite increased by 21.50 points, or 0.18%, to 12,256.92. The Dow Jones Industrial Average, however, fell by 55.69 points, or 0.17%, to 33,618.69. This uncertain direction follows Friday's rally, which was spurred by U.S. job data indicating a resilient labor market.

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^{Moez Kassam, a portfolio manager at Anson Funds, explained that after a substantial up day, "people need more good news to keep the market up every day in a row."}

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This week, investors' attention will be on the Labor Department's inflation report on Wednesday, expected to reveal a 0.4% increase in the consumer price index (CPI) for April, up from a 0.1% gain in March. In addition to CPI data, producer prices, weekly jobless claims, and consumer sentiment data are all scheduled for release during the week.

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These data points should help investors determine the effectiveness of the Federal Reserve's assertive tightening cycle, including its recent 25 basis point hike, in curbing inflation and assessing the validity of stagflation concerns.

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Michael James, Managing Director of Equity Trading at Wedbush Securities, commented that "the bigger picture is inflation will remain higher for longer and that we are heading into a recession." He added that until evidence contradicts this overarching thesis, "the overall market is going to remain somewhat range bound."

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The short-lived rally in regional banks' shares included PacWest Bancorp, which pared gains to 3.65% after initially surging by nearly 30% in the session. The bank drastically reduced its quarterly dividend to bolster capital.

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Concerns related to the collapse of First Republic Bank contributed to the decline in regional banks' shares last week. Carol Schleif, Chief Investment Officer for BMO Family Office, noted that "we've had some stabilization in the stocks of middle market banks today because people are realizing prices were moving counter to where the fundamentals actually were."

In other news, Berkshire Hathaway Inc's Class B shares, owned by Warren Buffett, rose 0.70% after posting a $35.5 billion first-quarter profit, buoyed by gains from stocks like Apple. Zscaler Inc's shares also surged by 20.63% after the cloud security company increased its annual forecast.

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On the NYSE, declining issues outnumbered advancing ones with a 1.14-to-1 ratio, while on the Nasdaq, a 1.07-to-1 ratio favored decliners. The S&P 500 reported 12 new 52-week highs and 7 new lows, and the Nasdaq Composite recorded 66.

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The information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions.

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