S&P 500 nearly flat as investors weigh chances of less aggressive rate hikes

  • Tech stocks gain
  • Macy’s and Lululemon drop holiday warnings
  • Indices: Dow down 0.3%, S&P 500 down 0.1%, Nasdaq up 0.6%

NEW YORK, Jan 9 (Reuters) – The S&P 500 Index (.SPX) erased early gains to close almost flat on Monday as expectations that the Federal Reserve would become less aggressive with its interest rate hikes were offset by lingering inflation concerns.

The Dow Jones ended lower and the Nasdaq Composite (.IXIC) finished well off the day’s highs.

Investors await comments on Tuesday from Fed Chairman Jerome Powell, who some strategists said could say more time is needed to show inflation is under control.

Money market bets showed a 77% chance of a 25 basis point hike at the Fed’s monetary policy meeting in February.

A consumer price report due Thursday could be key to rate expectations, said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina. “This week’s CPI report will be critical in refining the fed funds futures market.”

Investors may also have sold some stocks after recent strong market gains, said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago. “You see a bit of profit taking ahead of the CPI figure due out this week.”

The technology sector (.SPLRCT) advanced as Treasury yields fell. Consumer discretionary stocks (.SPLRCD) also rose, with Amazon.com Inc (AMZN.O) up 1.5% after Jefferies said it saw cost pressures ease for the retail giant electronics in the second semester.

Additionally, S&P 500 companies are about to kick off the fourth quarter earnings season, with results from major US banks expected later this week.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly

The Dow Jones Industrial Average (.DJI) fell 112.96 points, or 0.34%, to 33,517.65, the S&P 500 (.SPX) lost 2.99 points, or 0.08%, to 3,892.09 and the Nasdaq Composite (.IXIC) added 66.36 points, or 0.63%, to 10,635.65.

Shares of Broadcom Inc (AVGO.O) fell late in the session to end down 2% after Bloomberg, citing people familiar with the matter, reported that Apple Inc (AAPL.O) planned to drop a Broadcom chip in 2025 and use an in-house design instead.

Friday’s jobs report, which showed a moderation in wage increases, raised hopes that the Fed may become less aggressive in its push to hike rates to reduce inflation.

Shares of Tesla Inc (TSLA.O) rose 5.9% after the electric vehicle maker reported longer wait times for some Model Y versions in China, signaling that recent price cuts could fuel demand.

Macy’s Inc (MN) fell 7.7% and Lululemon Athletica Inc (LULU.O) fell 9.3% after both retailers released disappointing holiday quarter forecasts.

Volume on U.S. exchanges was 11.35 billion shares, compared to an average of 10.90 billion for the full session over the past 20 trading days.

Advancing issues outnumbered declining issues on the NYSE by a ratio of 1.85 to 1; on the Nasdaq, a ratio of 1.48 to 1 favored advancers.

The S&P 500 posted 13 new 52-week highs and two new lows; the Nasdaq Composite recorded 129 new highs and 32 new lows.

Additional reporting by Shubham Batra, Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta and Richard Chang

Our standards: The Thomson Reuters Trust Principles.

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