Wall Street Wavers After Rally, Focus on Inflation Data
Wall Street’s three main stock indexes were making little progress in either direction on Monday as investors awaited a crucial inflation reading that could shape expectations around how long the U.S. Federal Reserve will keep interest rates elevated.
After the indexes enjoyed a rally on Friday investors turned their focus to Consumer Price Index (CPI) data, due out Tuesday morning. Economists expect a headline increase of 3.3% for October, easing from 3.7% in September. But core prices are expected to be unchanged from the previous month.
“Everyone’s kind of in a holding pattern waiting to see what happens with the inflation data in morning,” Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.
While the CPI reading was likely the biggest concern, O’Rourke said that investors were also still digesting Moody’s weaker U.S. credit outlook issued after market close on Friday.
A majority of traders are betting that the Fed will keep interest rates unchanged this year, with odds of a cut of at least 25 basis points in May standing at nearly 46%, according to the CME Group’s FedWatch tool.
Several policymakers this week have pushed back against rate cut expectations, with some stressing on a data-dependent approach to monetary policy.
Richmond Fed President Thomas Barkin on Thursday said that while there’s been “real progress” on inflation, it is yet unclear if the U.S. central bank will need to push its policy rate higher to finish the job.
“We have had rates roll over here a little bit and I think that’s one of the reasons we have seen this rally over the last couple of weeks,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “If you think this rally has legs, yesterday gave you an opportunity to go buy some stocks today.”
Friday Moody’s lowered its outlook on the U.S. credit rating to “negative” from “stable”, citing large fiscal deficits and a decline in debt affordability.
This added to investor reluctance to make big decisions ahead of a weekend deadline that could result in a U.S. government shutdown, O’Rourke said.
U.S. House of Representatives Speaker Mike Johnson unveiled a Republican stopgap spending measure on Saturday aimed at averting a shutdown, but the measure quickly met opposition from lawmakers from both parties in Congress.
The Dow Jones Industrial Average rose 52.18 points, or 0.15%, to 34,335.28, the S&P 500 lost 0.82 points, or 0.02%, to 4,414.42 and the Nasdaq Composite dropped 12.31 points, or 0.09%, to 13,785.80.
The major U.S. stock indexes had rebounded so far this month, fueled by a stronger-than-expected earnings season and hopes that U.S. interest rates are near their peak.
Traders have priced in a nearly 86% chance that the Fed will hold interest rates in December, according to the CME Group’s FedWatch tool.
Among the S&P 500’s 11 major sectors energy was the biggest gainer, up 0.7%, while utilities was the biggest loser, down more than 1%.
While Tesla shares, up more than 4%, added some support to the consumer discretionary index declines in heavyweight stocks such as Apple and Microsoft helped weigh down the S&P 500 technology index.
Helping keep the Dow afloat, Boeing climbed 4.3% after Bloomberg News reported that China is considering resuming purchases of 737 Max aircraft.
And, Dubai’s Emirates placed an order for 90 more Boeing 777X jets at the opening of the Dubai Airshow on Monday.
Medtech companies were rising with Dexcom adding 5%, Insulet climbing more than 6% and Abbott rising 2% as analysts commented on data about the cardiovascular benefits for Novo Nordisk’s weight-loss drug Wegovy.
Advancing issues outnumbered declining ones on the NYSE by a 1.08-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored decliners.
The S&P 500 posted 23 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 44 new highs and 199 new lows.