The S&P 500 erased modest gains earlier and closed in the red on Wednesday as the market's comeback rally took a breather.
The broad equity benchmark dipped 0.1% to 4,241.84, falling for the first day in three and sitting 0.4% from an all-time high. The Dow Jones Industrial Average fell 71.34 points, or 0.2%, 33,874.24. The Nasdaq Composite was the relative outperformer with a 0.1% gain at 14,271.73, eking out another record closing high.
Leading the losses were the S&P 500 utilities sector, which dropped 1.1% Wednesday, while consumer staples and materials also registered modest declines.
Energy names including Exxon Mobil climbed as oil prices continued to rise. Brent crude topped $75 a barrel. Occidental Petroleum jumped more than 3%, while Devon Energy gained nearly 2%.
Some major technology names gave the broader market some support. Tesla jumped nearly 5.3%, while Netflix gained about 0.8%. Facebook also rose close to 0.5%.
Despite Wednesday's dip, the S&P 500 has risen 1.8% this week, bouncing back from a sell-off last week triggered by the Federal Reserve's surprise policy shift. The central bank projected much higher inflation for the year than previously, while signaling two rate increases as soon as 2023.
For June the S&P 500 and Nasdaq Composite are in the green, rising 0.9% and 3.8%, respectively. The Dow, however, is in the red for the month amid weakness in Caterpillar and JPMorgan.
"Stocks are facing a full count set-up in the second half," said Craig Johnson, chief market technician at Piper Sandler. "Risk for tighter monetary policy appears to growing along with uncertainty over market leadership, the trajectory of the economic recovery, and the sustainability of inflation. This backdrop will likely create some volatility curveballs, but not strikeouts for the secular bull market."
Fed Chairman Jerome Powell testified before a special House panel on Tuesday, which appeared to lift sentiment as he reiterated that inflation pressures will be temporary.
Powell cited airline tickets, hotel prices and lumber along with generally surging consumer demand pumping up an economy that a year ago faced substantial government-imposed restrictions in the early days of the pandemic. Those factors, he said, should "resolve themselves" in the coming months.
"They don't speak to a broadly tight economy and to the kinds of things that have led to higher inflation over time," he told the House Select Subcommittee on the Coronavirus Crisis.
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