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Investors await an earnings season that may be affected by high costs and supply-chain pressure.

Angela Weiss/AFP via Getty Images

U.S. stocks fell on Tuesday as rising commodity prices again raised concerns about inflationary pressures and how they could drag on corporate profit margins.

The

Dow Jones Industrial Average
dropped 118 points, or 0.3%, to close at 34,378.34—extending its decline from Monday, when the index fell 250 points. The

S&P 500
slipped 0.2% and the

Nasdaq Composite
ticked 0.1% lower. The indexes wavered between gains and losses throughout the day.

The price of WTI crude oil rose as much as 1.3% Tuesday, before that gain moderated, with oil ending at just over $80 a barrel. Oil has gained more than 65% year to date. The price of natural gas rose 2.3%.

The price of lumber increased as much as 3.6% Tuesday, before dipping, and is still almost 60% higher than its level just before the pandemic’s initial lockdowns in 2020.

Higher oil and lumber prices could dent demand, but consumers currently still have a lot of cash as people get back to work and continue to spend the stimulus money the government injected into households to shore up demand after lockdowns.

The more pressing issue, especially as companies report earnings this week, is that higher commodity prices could hit corporate profit margins.

“The market is going to be focusing more on corporate margins as a whole relative to any type of commodity pressure that could be hurting consumers,” said Dave Wagner, portfolio manager and analyst at Aptus Capital Advisors.

The next major catalyst for markets is expected to be the coming earnings season, which begins in earnest when major U.S. banks report results later this week. Investors will watch loan volumes and the financial strength of the U.S. consumer. Beyond the financial services sector, investors will monitor how rising costs and supply-chain constraints are affecting corporate sales and profit margins.

With stocks ending in the red on Tuesday, “It does feel like we are just biding time ahead of a big day tomorrow,” wrote Michael Reinking, senior market strategist at New York Stock Exchange. 

On Wednesday, inflation data in the form of the consumer price index will arrive. Investors will get another chance to gauge the impact of rising prices on consumers and businesses, and how quickly the Federal Reserve might raise interest rates. 

In Washington, the House of Representatives is expected to pass a bill that would temporarily raise the government debt ceiling until December. 

Here are nine stocks on the move Tuesday:


Umpqua Holdings

(ticker: UMPQ) stock fell 4.7% after the company announced it is merging with Columbia Banking System (COLB) to create a combined regional banking company worth $7.7 billion. 


GlaxoSmithKline

(GSK) stock rose 1% in New York as several private-equity firms are considering buying the company’s consumer business


Fastenal

(FAST) stock climbed 3.1% after the company reported earnings of 42 cents a share, in line with estimates, on sales of $1.55 billion, above expectations for $1.54 billion. “Pricing power appears solid and sufficient to offset higher costs for transportation and underlying product,” writes


Morgan Stanley

‘s Joshua Pokrzywinski. 


MGM Resorts International

(MGM) stock jumped 9.6% after getting upgraded to Outperform from Neutral at Credit Suisse. 


CureVac

N.V. (CVAC) stock fell 4.6% after the company said it would halt the development of its Covid-19 vaccine and instead focus on its mRNA shots against Covid-19 with GlaxoSmithKline. 

Broad market concerns and a report from The Wall Street Journal zeroing in on plans from Chinese leader Xi Jinping’s to overhaul the country’s financial system reversed a rally in


Alibaba

Group Holding (BABA) stock, which had until Monday surged around 25% over the past five days. Shares in the internet giant were down 3.9% in Hong Kong. Peer


Tencent

(0700.H.K.) fell 2.6% in Hong Kong, with other tech companies also dropping.


Baidu

stock (BIDU) was down 4% and


JD.com

(JD) declined 2.3%. Alibaba’s U.S.-listed shares were 0.8% lower.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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