Wall Street’s main indexes have slipped as investors await a crucial inflation reading and other economic data this week that could shape expectations around how long the Federal Reserve will keep interest rates elevated.
Megacap growth stocks were a big drag, as the benchmark US 10-year Treasury yield rose. Shares of Microsoft, Amazon.com and Apple fell between 0.5 per cent and 1.5 per cent in early trade.
Eight of the 11 major S&P 500 sectors were in the red, with rate-sensitive real estate stocks down 1.2 per cent and leading declines.
This week’s economic data as well as speeches from Fed officials will provide clues on the trajectory of interest rates amid growing expectations that the Fed is done hiking borrowing costs.
A report on Tuesday is expected to show headline consumer prices eased to 3.3 per cent in October from 3.7 per cent in September. However, core prices are seen unchanged from the previous month.
“If the year-over-year (number) continues to show a decline, then that seals the fact that the Fed is not going to raise in December and most likely they’re done with the hiking campaign,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
The major US stock indexes have rebounded strongly this month, fuelled by a stronger-than-expected earnings season and on hopes that US interest rates are near their peak.
The benchmark S&P 500 closed at near eight-week highs on Friday, while the tech-heavy Nasdaq hit a two-month peak.
Traders have priced in a nearly 86 per cent chance that the Fed will hold interest rates in December, but have pushed back bets of rate cuts to June from May, according to the CME Group’s FedWatch tool.
Adding to the cautious mood, Moody’s lowered its outlook on the US credit rating to “negative” from “stable”, citing large fiscal deficits and a decline in debt affordability.
“With the absence of macro news and the strong rally that we had on Friday, the downgrade and the anticipation of the inflation data is inducing some selling this morning,” Cardillo said.
US House of Representatives Speaker Mike Johnson unveiled a Republican stopgap spending measure on Saturday aimed at averting a government shutdown on Friday, but the measure quickly ran into opposition from both sides of Congress.
In early trading on Monday, the Dow Jones Industrial Average was down 20.28 points, or 0.06 per cent, at 34,262.82, the S&P 500 was down 19.10 points, or 0.43 per cent, at 4,396.14, and the Nasdaq Composite was down 96.40 points, or 0.70 per cent, at 13,701.71.
Medtech companies such as Dexcom, Abbott and Insulet rose between two per cent and five per cent as analysts said data for cardiovascular benefits for Novo Nordisk’s weight-loss drug Wegovy is better than feared for the companies.
Cushioning the Dow, Boeing climbed 5.1 per cent after Bloomberg News reported that China is considering resuming purchases of 737 Max aircraft.
Declining issues outnumbered advancers for a 2.49-to-1 ratio on the NYSE and for a 2.18-to-1 ratio on the Nasdaq.
The S&P index recorded 11 new 52-week highs and one new low, while the Nasdaq recorded 19 new highs and 82 new lows.
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