S&P 500 stuck in trading lull while bonds retreat

The S&P 500 drifted between gains and losses throughout the day, with companies tied to a broader reopening of the economy -- such as retail and financial shares -- outperforming. A rally in Tesla Inc. drove the Nasdaq Composite to a fresh record even as the gauge rose just 0.1%. Fannie Mae and Freddie Mac tumbled as the Supreme Court dealt a blow to investors in their challenge to the U.S. collection of more than $100 billion in profits from government-sponsored enterprises.

Equities briefly turned negative after Atlanta Fed President Raphael Bostic said the central bank could decide to slow its asset purchases in the next few months and he favored lifting rates in 2022. Treasury Secretary Janet Yellen said her department may exhaust emergency measures to avoid breaching the U.S. debt limit as soon as August unless Congress acts to avert a potential default that would be "catastrophic."

Data Wednesday showed U.S. manufacturing activity expanded in June at the fastest pace in records dating back to 2007. Meantime, sales of new homes unexpectedly fell last month as elevated home prices continued to weigh on affordability. The reports came a day after Fed Chair Jerome Powell reiterated his views that policymakers will be patient in waiting to lift rates despite higher inflation.

"You've got this inflation issue that has captured the imagination of investors for the first time in a long time," said David Donabedian, chief investment officer of CIBC Private Wealth Management. "I don't have a great case for why the market takes another leap forward here over the summer. It's going to be more of a churn, and we usually do get a little bit more volatility because volumes are down."

The recent rally in Treasuries has helped bring their relationship with U.S. equities back to more traditional ground. One-month correlations between the Bloomberg Barclays U.S. Treasury Index and the S&P 500 Total Return Index have fallen back below zero. Stocks and bonds moving in lockstep create headaches for fund managers who use fixed-income securities to diversify their portfolios and protect them against a sell-off in equities.

These are some of the main moves in financial markets:

Stocks

- The S&P 500 fell 0.1% as of 4 p.m. EDT

- The Nasdaq 100 was little changed

- The Dow Jones industrial average fell 0.2%

- The MSCI World index was little changed

Currencies

- The Bloomberg Dollar Spot Index was little changed

- The euro fell 0.1% to $1.1925

- The British pound was little changed at $1.3960

- The Japanese yen fell 0.3% to 110.99 per dollar

Bonds

- The yield on 10-year Treasurys advanced two basis points to 1.49%

- Germany's 10-year yield declined one basis point to -0.18%

- Britain's 10-year yield was little changed at 0.78%

Commodities

- West Texas Intermediate crude rose 0.6% to $73.26 a barrel

- Gold futures were little changed