US stocks eased on Tuesday after the S&P 500 hit a record high earlier in the session, as investors awaited cues from the Federal Reserve about whether a recent jump in inflation would prompt a sooner-than-expected tapering in monetary policy.

At 9:46 am ET, the Dow Jones Industrial Average was down 76.35 points, or 0.22 percent, at 34,317.40, the S&P 500 was down 2.51 points, or 0.06 percent, at 4,252.64, and the Nasdaq Composite was down 14.68 points, or 0.10 percent, at 14,159.46.

Assurance from the Fed that rising prices, coupled with falling US Treasury yields, are transitory have helped ease some concerns over inflation with all eyes turning to the central bank's statement at the end of its two-day policy meeting on Wednesday.

The benchmark S&P 500, the blue-chip Dow Jones and the tech-stocks focused Nasdaq have gained 13.3 percent, 12.3 percent and 10 percent, respectively so far this year, largely driven by optimism about an economic reopening.

Economic data out of the US Tuesday painted a murky picture of the economic recovery. Retail sales fell more than expected in May as consumers shifted spending to services that had once been inaccessible during the height of the pandemic.

In a separate report, the Labor Department said its producer price index for final demand increased 0.8 percent in May, up from a 0.6 percent increase in April and slightly ahead of economist forecasts.

But for now, investors seem to be sticking with the Fed’s view any inflation is transitory, helping US and European shares scale new highs, with the pan-regional STOXX 600 rising 0.3 percent, its eighth straight day of gains. 

The MSCI world equity index, which tracks shares in 45 nations, remained unchanged to 721.1.

“Markets seem to be in a tug-of-war over the past month between the understanding that we’re having both great economic and earnings growth, juxtaposed with the fact that we need to get our head wrapped around what inflation looks like and what it will mean both to profit margins and to the Fed.

“Investors may be biding time until the Federal Reserve wraps up its two-day meeting on interest rates on Wednesday before deciding which way to commit their capital,” wrote Art Hogan, chief market strategist at National Securities in New York.

Fed Chairman Jerome Powell will flesh out the Fed’s thinking with a news conference Wednesday after its latest policy statement.

Traders around the world are looking for any hints about whether and when the Fed plans to taper its bond-buying program as the US economy bounces back from the pandemic fallout.

Nearly 60 percent of economists in a Reuters poll expect a taper announcement will come in the next quarter, despite a patchy recovery in the job market.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan traded flat. Japan’s Nikkei rose 1 percent and the Australian benchmark traded up 0.93 percent, but Chinese blue chips fell 1.1 percent.

Dollar steady

In currency markets, the dollar held its recent gains against major currencies. The dollar index rose 0.05 points or 0.06 percent, not far off the top of its recent range.

In the face of the strong dollar, spot gold was down slightly at US$1,864.81 per ounce. 

Benchmark 10-year yields were 1.5058 percent, little higher than Monday, when they rebounded from Friday’s three-month low.

As for commodities, US crude was up 0.8 percent to US$71.47 a barrel. Brent crude rose to US$73.76 a barrel as talks dragged on over the United States rejoining a nuclear agreement with Tehran, suggesting any surge in supply from Iran is some time away.

Even bitcoin was fairly quiet, fluctuating a little above US$40,000.