The S&P 500 closed Monday’s session slightly down as investors held their breath before a crucial inflation reading that could provide clues as to how long the U.S. Federal Reserve will keep interest rates elevated.
After the indexes enjoyed a solid rally on Friday, the market turned its focus on Monday 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.
The CPI reading, along with labor market, “are clearly in the driver’s seat for what matters to financial markets, because it dictates where Fed policy goes from here,” said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management Company in Milwaukee, Wisconsin.
“The market has the expectation the Fed is done with interest rate hikes and for that to be true, you need to have continued progress on the inflation front,” along with labor market cooling, he said.
Traders have priced in a nearly 86% chance the Fed holds interest rates steady in December, according to the CME Group’s FedWatch tool.
While the CPI reading was the key issue keeping investors “in a holding pattern” on Monday, Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut said they were also digesting a weaker U.S. credit outlook issued.
Moody’s late on Friday 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 potentially 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.
According to preliminary data, the S&P 500 lost 4.03 points, or 0.09%, to end at 4,411.51 points, while the Nasdaq Composite lost 30.36 points, or 0.22%, to 13,767.74. The Dow Jones Industrial Average rose 49.76 points, or 0.15%, to 34,332.86.
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.
Among the S&P 500’s 11 major sectors energy was the biggest gainer during the session, while utilities was the biggest loser.
Helping keep the Dow afloat, Boeing rallied on Monday 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 including Dexcom, Insulet and Abbott rose as analysts discussed data about the cardiovascular benefits for Novo Nordisk’s weight-loss drug Wegovy.
