S&P 500 is flat as weaker-than-expected housing data dents sentiment

Major U.S. stock indexes fluctuated on Tuesday after data showed housing starts dropped sharply last month.

The Dow Jones Industrial Average rose just 30 points, while the S&P 500 traded near the flatline. The tech-heavy Nasdaq Composite added 0.1% as major tech stocks continued to rebound. Facebook, Amazon, Apple and Microsoft all traded higher.

Housing starts tumbled 9.5% to a seasonally adjusted annual rate of 1.569 million units last month, the Commerce Department said on Tuesday. Economists polled by Dow Jones had forecast starts falling to a rate of 1.7 million units in April.

Better-than-expected earnings from Home Depot and Walmart helped support sentiment. Walmart shares jumped more than 3% after reporting strong grocery sales and e-commerce growth for the quarter.

Home Depot shares rose more than 1% after stronger-than-expected quarterly results. The retailer reported earnings of $3.86 a share for the previous quarter, much higher than the $3.08 expected by analysts polled by Refinitiv. Net sales surged 32.7%, more than expected.

Growth-heavy stocks have remained under pressure in recent sessions as investors fret over whether a pop in inflation will entrench or blow over as the Federal Reserve expects. Inflation above the Fed’s 2% target for a sustained period could prompt the central bank to tighten monetary policy and dampen stocks that outperform the market when interest rates are low.

“Growth may be peaking, but it’s not a bull-market breaker yet,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “Data can’t stay at peak levels forever, and tailwinds from fiscal stimulus are likely to wind down. This can complicate the environment for investors; history suggests that when the economy starts to slow, market returns tend to slow with it.”

Investors blamed that angst for the S&P 500’s dismal performance last week, which saw the broad market index fall 4% through midweek amid heightened inflation fears. The broad equity benchmark eventually rebounded and ended the week down 1.4%. All three benchmarks posted their worst week since February 26.

The Fed’s minutes from its last meeting, which will be released Wednesday, could offer some clues on policymakers’ thinking on inflation.

Elsewhere, the first-quarter earnings season is wrapping up with more than 90% of the S&P 500 companies having reported their results. So far, 86% of S&P 500 companies have reported a positive EPS surprise, which would mark the highest percentage of positive earnings surprises since 2008 when FactSet began tracking this metric.