NEW YORK, RAW – Wall Street has closed lower as inflation fears drove investors away from market-leading growth stocks in favour of cyclicals which stand to benefit most as the economy reopens.

Industrial and healthcare shares limited the Dow’s decline but the blue-chip average reversed course late in the session to snap a three-day streak of record closing highs.

“The market leadership is not doing all that well this year,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

“There’s been a general rotation away from growth to other parts of the market.”

A demand resurgence is colliding with strained supply of basic materials, helping to fuel inflation worries.

“Once the supply lines are rebuilt this will go away. But it’s going to take some time,” Nolte added.

“It’s different from flipping on a light switch.”

The break-even rate on five-year and 10-year US Treasury Inflation-Protected Securities (TIPS) touched their highest levels since 2011 and 2013, respectively.

“There’s still some push and pull as to whether the market believes inflation is transitory or something that’s going to stick around,” Nolte said.

Inflation concerns will be in the minds of investors when the Labor Department releases its latest CPI report on Wednesday.

A shutdown to halt a ransomware attack on the Colonial Pipeline entered its fourth day, hobbling a network which transports nearly half of the east coast’s fuel supplies.

The Dow Jones Industrial Average fell 32.6 points, or 0.09 per cent, to 34,745.16, the S&P 500 lost 44.09 points, or 1.04 per cent, to 4,188.51 and the Nasdaq Composite dropped 350.38 points, or 2.55 per cent, to 13,401.86.

First-quarter reporting season has entered the home stretch, with 439 of the companies in the S&P 500 having reported as of Friday.

Of those, 87 per cent have beaten consensus expectations, according to Refinitiv IBES.

Analysts now expect year-on-year S&P earnings growth of 50.4 per cent on aggregate, more than double the rate forecast at the beginning of April and significantly better than the 16 per cent first-quarter growth expected on January 1, per Refinitiv

Hotel operator Marriott International Inc missed quarterly profit and revenue expectations due to weak US bookings which offset a rebound in China.

Its rival Wynn Resorts Ltd is expected to report after the bell.

Electric vehicle stocks put on the brakes, with Tesla Inc and Fisker Inc losing ground after Workhorse Group missed quarterly revenue expectations.

FireEye advanced after industry sources identified the cybersecurity firm as among those helping Colonial Pipeline recover from the recent cyberattack.