Stocks slip as messy May comes to a close

Stocks closed lower Tuesday and the market eked out a tiny gain for May, a fitting end to a tumultuous month as worries about a possible recession, inflation and rising interest rates bruised Wall Street.

The S&P 500 fell 0.6%, having recouped about half of its loss from earlier in the day. The Dow Jones Industrial Average fell 0.7%, while the Nasdaq composite slid 0.4%. Both also pared some of their losses after falling at least 1.4%.

Such swings should perhaps be no surprise given Wall Street’s action this month, amid some of the wildest trading since the early days of the pandemic. The S&P 500 finished the month with a gain of less than 0.1%, which followed an 8.8% slump in April. The index is now 13.9% below its record set early this year. But the slight move for the month belies sharp lurches down and up that shook investors along the way.

Through mid-May, the S&P 500 tumbled to seven straight losing weeks, for its longest such streak since the dot-com bubble was deflating two decades ago. Slowing data on the U.S. economy heightened worries that high inflation will force the Federal Reserve to raise interest rates so aggressively that it will cause a recession.

Some high-profile retailers also said inflation is eating into their profits, adding more urgency to the concerns. They all combined to bring Wall Street to the brink of what’s called a bear market, where the S&P 500 was on the verge of closing more than 20% below its record.

“Outside of a peace agreement in Ukraine, it’s difficult to construct a case for more than a bear market rally,” which would be just a temporary turn higher for stocks, Morgan Stanley strategists led by Michael Wilson wrote in a report. They said that the more stock prices rise, the more likely the Federal Reserve will be to hike interest rates.

The S&P 500 fell 26.09 points to 4,132.15, while the Dow lost 222.84 points at 32,990.12. The Nasdaq dropped 49.74 points to 12,081.39.

Smaller company stocks feel more than the broader market. The Russell 2000 slid 23.85 points, or 1.3%, to 1,864.04.

Trading has been turbulent in recent weeks amid worries about a possible recession, inflation and rising interest rates.

U.S. Treasury yields rose following reports showing confidence among U.S. consumers was higher than economists expected and home prices rose more than forecast. The yield on the 10-year Treasury climbed to 2.85% from 2.75% late Friday.