Market Snapshot: U.S. stocks struggle for direction as opening gains fizzle despite strong durables data

What’s driving markets

Stocks struggled to hang on to gains after data showed U.S. durable-goods orders rose by 0.7% in May, versus forecasts for a 0.2% rise, and pending home sales rebounded last month, reversing a six-month decline. Investors were caught between recession and inflation fears.

“Stocks can’t win right now, either the economic data softens and the economy is much weaker than we thought or robust readings pave the way for the Fed to be more aggressive with their inflation fight,” said Edward Moya, senior market analyst at Oanda, in a note.

Stocks had bounced last week in a move analysts credited to expectations a slowing economy could see the Federal Reserve hike rates less aggressively than previously expected. Fed Chairman Jerome Powell warned lawmakers that achieving a so-called soft landing for the economy as the Fed tightens interest rates would be “very challenging.”

JPMorgan quantitative strategist Marko Kolanovic published a note saying the market could rise 7% this week, due to the need for portfolios to rebalance as the month, quarter and first-half closes. That effect already played out near the end of the first quarter, and near the end of May.

“The S&P 500 is nearly 8% up from its lows at the start of the month and rallied 3% on Friday,” according to analysts at ING, in a Monday note. “Helping the rally has no doubt been last week’s repricing of tightening cycles around the world where 25-50 basis points of expected tightening were removed from some money market curves in just a few days. Driving that pricing seemed to be the much broader discussion — including from Federal Reserve Chair Jerome Powell — over the risks of recession.”

Strategists at Credit Suisse say bond yields may have seen their peak, particularly for Treasury-inflation protected securities, which in turn means the dollar DXY, -0.29%  is close to its summit. They say their lead indicators are consistent with 0% GDP growth, as evidenced by the collapse in housing affordability, the weakness of corporate confidence and the weakness in the employment gauge of the Institute for Supply Management manufacturing index.

Group of Seven economic powers are meeting in Germany where they expect to announce an agreement on a price cap on Russian oil.

Companies in focus

• Frontier Airlines parent Frontier Group Holdings Inc. ULCC, -11.29% issued a letter to Spirit Airlines Inc. SAVE, -7.73% shareholders, urging them to support the air carriers’ agreed upon merger deal. In the letter, Frontier Chairman William Franke and Chief Executive Barry Biffle said the recently amended Frontier-Spirit deal offers Spirit shareholders value “well in excess” of JetBlue Airways Corp.’s JBLU, +1.97% “illusory proposal, which lacks any realistic likelihood of obtaining regulatory approval.” Frontier shares fell more than10%, while Spirit shares dropped 8% and JetBlue shares gained 1.3%.

Other assets

• The yield on the 10-year Treasury note TMUBMUSD10Y, 3.209% rose 4 basis points to 3.166%. Yields and debt prices move opposite each other.
• The ICE U.S. Dollar Index DXY, -0.29% edged down 0.4%.
• Bitcoin BTCUSD, -2.97% fell 3.4% to trade near $20,675.
• Oil futures traded higher in choppy trade, with the U.S. benchmark CL.1, +2.56% up 1.3% near $109.04 a barrel. Gold GC00, -0.28% was off 0.2% below $1,827 an ounce.
• The Stoxx Europe 600 SXXP, +0.52% finished 0.5% higher, while London’s FTSE 100 UKX, +0.69% gained 0.7%.
• The Shanghai Composite SHCOMP, +0.88% ended 0.9% higher, while the Hang Seng Index HSI, +2.35% jumped 2.4% and Japan’s Nikkei 225 NIK, +1.43% rose 1.4%.

— Steve Goldstein contributed to this article.