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Stock Market News for May 20, 2021

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U.S. stock markets closed lower on Wednesday, but off session lows, led by a plunge in cryptocurrency prices. Moreover, investors’ sentiment was dampened following the release of the minutes of the U.S. Federal Reserve’s April monetary policy meet which hinted that a strong economic recovery could warrant tightening of monetary policy. All the three major stock indexes closed the day in red.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.5%, or 164.62 points, closing at 33,896.04, continuing its three-day losing streak. Notably, 25 components of the 30-stock index ended in red while 5 finished the day in green.

Moreover, the tech-heavy Nasdaq Composite closed the day at 13,299.74, down 3.90 points, maintaining its losing streak for the third successive session, on the back of weak performance by large-cap technology stocks. Meanwhile, the S&P 500 lost 0.3%, closing the day at 4,115.68, continuing its losses for the third consecutive session. The Energy Select Sector SPDR (XLE), the Materials Select Sector SPDR (XLB) and the Consumer Discretionary Select Sector SPDR (XLY) fell 2.5%, 1.5% and 0.8%, respectively. Notably, nine out of eleven sectors of the benchmark index closed in the negative zone and two in the green.

The fear-gauge CBOE Volatility Index (VIX) was up 3.9% to 22.18. A total of 10.70 billion shares were traded on Wednesday, higher than the last 20-session average of 10.60 billion. Decliners outnumbered advancers on the NYSE by a 2.15-to-1 ratio. On Nasdaq, a 1.71-to-1 ratio favored declining issues.

Fall in Cryptocurrency Prices Led Wall Street Lower

Wall Street ended Wednesday’s session lower, but off session lows, as the prices of cryptocurrencies recovered most of the decline. Cryptocurrencies had taken a hit to start the session as China issued a warning to financial institutions to not provide cryptocurrency services.

Consequently, shares of technologies companies linked to cryptocurrencies like MicroStrategy Inc. (MSTR - Free Report) and Tesla. Inc. (TSLA - Free Report) , took a hit and lost 6.6% and 2.5%, respectively, to close the session. Notably, both companies carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fed Hinted at Potential Tightening of Monetary Policy

Investors’ sentiment took a hit in Wednesday’s session after the minutes from the U.S. Federal Reserve’s monetary policy meet in April revealed that a number of policymakers were thinking that if the economy continued to progress at a rapid pace, it would become appropriate to reconsider the Fed’s monthly purchase program of government bonds. The policy has been designed to keep long-term interest rates at lower levels.

Meanwhile, the European Central Bank expressed concern and warned of financial stability risk amid “exuberance” in markets, pointing out that the fiscal and monetary stimulus provided by governments to offset the challenges posed by the COVID-19 pandemic is building up imbalances.

Other Economic Data

The Energy Information Administration reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) for the week ending May 14, increased by 1.3 million barrels per day from the previous week. However, crude oil inventories are below the five-year average by about 1%.

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