The S&P 500 was muted and Nasdaq inched lower on Monday in the run-up to an action-packed week that includes the Federal Reserve’s policy meeting and inflation data, both of which will test investor optimism about monetary policy easing next year.
The upbeat sentiment around stabilizing interest rates and robust quarterly earnings caused equities to rebound towards the end of the year, with the benchmark S&P 500 hitting its highest intra-day level of the year.
The S&P 500 and Nasdaq also notched their highest closing since early 2022 on Friday, after data showed nonfarm payrolls were higher than expected, underscoring hopes that the world’s largest economy could control inflation without slipping into a recession.
Focus now shifts to the Consumer Price Index (CPI) data due on Tuesday, which is expected to show headline inflation remaining unchanged in November, and the Fed’s last interest rate decision of the year on Wednesday.
“Investors are thinking how long this advance will last and if it is the beginning of a new meaningful leg higher,” said Sam Stovall, chief investment strategist at CFRA Research.
“The CPI data tomorrow should confirm that the trend in inflation is downward and that the quantitative tightening is causing inflationary trends to decline, while at the same time not throwing us into recession.”
While money markets have almost fully priced in a rate-hike pause in the upcoming meeting, bets of a rate cut next year have been seeping in, with traders seeing a 39% chance of at least a 25-basis-point cut in March 2024 and a 71.4% chance in May, according to the CME Group’s FedWatch tool.
At 10:19 a.m. ET, the Dow Jones Industrial Average was up 56.84 points, or 0.16%, at 36,304.71, the S&P 500 was up 1.88 points, or 0.04%, at 4,606.25, and the Nasdaq Composite was down 33.78 points, or 0.23%, at 14,370.19.
Elsewhere, the European Central Bank and the Bank of England, among others, are also scheduled to deliver their interest rate decisions later this week.
The tech-heavy Nasdaq was under pressure, with megacaps including Alphabet and Amazon.com shedding over 2% each, while chip makers like Micron Technology and Broadcom cushioned losses, adding 2% and 4%, respectively.
Limiting losses on the blue-chip Dow, Nike added 1.4% after brokerage Citigroup upgraded its stock to “buy” from “neutral”.
Among other movers, Macy’s soared 16.6% after an investor group consisting of Arkhouse Management and Brigade Capital made a $5.8 billion offer to take the department store chain private, according to a source.
Cigna jumped 15.6% – after the health insurer ended its attempt to negotiate the acquisition of rival Humana , according to sources – and announced a $10 billion share buyback plan.
Crypto stocks like Riot Platforms, Coinbase and Marathon Digital slid between 4.4% and 10.5% as bitcoin fell to a week’s low.
Declining issues outnumbered advancers for a 1.04-to-1 ratio on the NYSE and for a 1.35-to-1 ratio on the Nasdaq.
The S&P index recorded 46 new 52-week highs and no new lows, while the Nasdaq recorded 72 new highs and 75 new lows.
