US open: Investors take profits as markets await inflation data

US stocks were in retreat mode on Wednesday with investors continuing to take profits after Wall Street indices' record highs, as jitters about inflation eroded risk appetite.

The Dow was down 0.9% at 38,522.69 by 1015 EDT, falling for the fifth time in the last seven days as it continues to pullback from the 40,000+ level reached on 17 May.

The Nasdaq, which hit a new closing high of 17,019.88 on Tuesday, was down 0.4% early on at 16,957.02 as the recent rally in Nvidia's share price faded, while the S&P 500 fell 0.6% to 5,274.99, having touched a fresh peak last week.

"There’s been a big jump in US Treasury yields since Friday, and this appears to be weighing on sentiment. It’s also fair to say that there’s nothing out there which is undeniably positive. The first-quarter earnings season is pretty much done now, so there’s a risk that the market has lost one significant leg of support," said David Morrison, senior market analyst at Trade Nation.

The yield on the 10-year US Treasury note was up a further 4 basis points at around the 4.6% mark – a level it has not seen since 1 May – as eyes start to turn towards Friday's personal consumption expenditures index for April which will give investors their first glimpse of how inflation is faring in the first month of the second quarter.

Market forecasts are for annual inflation to have held steady at 2.7%, with the core rate unchanged at 2.8%. Morrison said the data could lead to some "big market moves" if it significantly misses market expectations.

"Aside from this, there’s little in the calendar. So it shouldn’t be a surprise to see stock indices rangebound until we see the next catalyst for a big move. Perhaps it also shouldn’t be a surprise to see stocks drift lower now and pull back from their record highs as we approach the summer months," he said.

Adding to inflationary concerns on Wednesday was the recent rise in the price of oil, as ongoing violence in the Middle East and increased speculation about output cuts propped up crude for the second straight session. Following strong gains on Tuesday, WTI crude was flat at $79.81 a barrel – its highest level in four weeks.

Market movers

ConocoPhillips confirmed on Wednesday that it has agreed to buy Marathon Oil in an all-share deal worth $22bn, causing shares in the latter to gain 9%. The acquisition will add "highly complementary" acreage to ConocoPhillips’ existing US onshore portfolio, it said, but that didn't stop shares falling more than 3%.

Pharma giant Merck rose after agreeing to buy ophthalmology-focused biotechnology firm EyeBio for up to $3bn, getting its hands on a pipeline of clinical and preclinical candidates for the treatment of retinal diseases.

Retail brokerage Robinhood gained slightly after announcing a $1bn share buyback the previous evening, while carrier American Airlines plummeted 14% after cutting its sales and profit forecasts for the second quarter.