Stocks were on track for a mixed month as escalating fears over the likelihood of a summer rate hike from the Federal Reserve erased gains for the Dow Jones Industrial Average.
The Dow fell 0.7% on Tuesday, losing minor gains for May. The S&P 500 was down 0.3%, and the Nasdaq slid 0.04%. Volatility spiked 12% in the final day of trading of May.
Consumer stocks were lower as a read on confidence in May suggested spending over the month could pull back from April's highs. Consumer confidence in May fell to the lowest level since late 2015. The index slipped to 92.6 over the month, down from 94.7, as the outlook for business conditions and the U.S. jobs market slightly weakened, according to the Conference Board.
Earlier in the session, data showed that consumer spending in the U.S. jumped 1% in April, the biggest increase in nearly seven years, according to the Commerce Department. Strong demand for new cars and trucks and higher fuel prices led the increase. Economists had expected spending to increase 0.7%. Incomes rose 0.4%, the third increase of the year, while the savings rate slipped to 5.4% after reaching its highest level since 2012 in March.
"The overall tone of this report was very constructive, and the solid rebound in spending will likely be interpreted at the Fed as a key indication that the economic recovery has regained its footing after the missteps over the past three quarters," said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities.
The two data sets pulled markets in opposite directions with discretionary spending stocks the worse for wear. Dow components Nike (NKE) - Get Report , and Home Depot (HD) - Get Report were both lower.
Walt Disney (DIS) - Get Report also dragged on the blue-chip index after a disappointing weekend at the box office. The movie studio's Alice Through the Looking Glass generated just $34.1 million in domestic ticket sales, well below consensus of around $60 million. It's a rare miss for Disney which blew analysts' expectations out of the water earlier in the year with the outsized box-office success of The Jungle Book.
U.S. stocks closed last week with their best five-day gain in weeks as Wall Street grew more comfortable with the idea of a rate hike from the Fed sooner rather than later. On Friday, Fed Chair Janet Yellen suggested the central bank could implement another rate hike this summer.
Crude closed out the month with gains of nearly 7%. Oil briefly recovered a level above $50 in May as reductions to U.S. crude production alleviated a supply glut and as fuel demand picked up. Crude has closed higher for four straight months. Oil prices fell 0.8% on Tuesday to $48.92 a barrel.
U.S. home prices rose in March as constrained supply hindered robust demand. Prices increased 0.9%, up form 0.7% a month earlier, according to the S&P Case-Shiller Home Price Index. Economists had expected prices to increase 0.8%.
Economic activity in the Chicago area returned to contraction territory in May, according to the latest Chicago PMI data. Chicago PMI fell to 49.3 in May, its lowest level since February. Chicago PMI has been in contraction territory six times in 12 months.
The holiday-shortened week is jam-packed with economic data including the ISM manufacturing index on Wednesday, and international trade and the U.S. jobs report for May on Friday. The European Central Bank also will convene for a monetary policy meeting with an announcement set for Thursday.
European stocks were slightly lower on Tuesday after inflation in the region remained in negative territory over the month. Inflation fell 0.1% in May, according to a flash estimate from Eurostat, slightly less than the 0.2% decline in April. May's reading shows a long way to go before inflation hits the ECB's 2% target.
Allergan (AGN) - Get Report was flat after billionaire investor Carl Icahn disclosed he had taken a "large position" in the drugmaker. Icahn noted he was "very supportive" of CEO Brent Saunders and that Icahn Enterprises had "every confidence in Brent's ability to enhance value for all Allergan shareholders."
SodaStream (SODA) - Get Report rose 5.1% after announcing a new home beer-brewing system which will first launch in Europe. The homemade soda company has partnered with light beer brand Blondie to deliver consumers the ability to create homemade beer from a concentrate pod and sparkling water through SodaStream's device.
Celator Pharmaceuticals (CPXX) surged 71% after Jazz Pharmaceuticals (JAZZ) - Get Report agreed to pay $1.5 billion for the cancer-treatment biotech company. Jazz will pay $30.25 a share for New Jersey-based Celator, nearly double its Friday close. The deal provides Jazz access to Celator's pipeline drug to treat leukemia.
Medtronic (MDT) - Get Report moved lower by 2% despite topping fourth-quarter estimates on its top- and bottom-lines. The medical technology company earned an adjusted $1.27 a share in its recent quarter, a penny above estimates, while revenue jumped 4% to $7.6 billion. Medtronic expects full-year 2017 earnings between $4.60 and $4.70 a share.
Great Plains Energy (GXP) fell 5.6% after agreeing to purchase Westar Energy (WR) for $8.6 billion, a significant step of consolidation in the utilities sector as the two companies seek to ensure more control over consumer rates. The companies expect the deal to close in spring of 2017, pending regulatory approval.