In Monday’s trading session, the S&P 500 experienced a slight dip as investors approached the market cautiously, awaiting a pivotal inflation report that could shed light on the Federal Reserve’s future interest rate decisions.
Following a robust rally on Friday, attention shifted on Monday to the impending release of the Consumer Price Index (CPI) data scheduled for Tuesday morning. Economists anticipate a headline increase of 3.3% for October, a slight decrease from the 3.7% reported in September. However, core prices are projected to remain unchanged from the previous month.
Matt Stucky, Chief Portfolio Manager for Equities at Northwestern Mutual Wealth Management Company, emphasized the significance of the CPI reading and the labor market, stating, “are clearly in the driver’s seat for what matters to financial markets, because it dictates where Fed policy goes from here.” Stucky added, “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,” coupled with cooling in the labor market.
Traders have factored in an approximately 86% probability that the Fed will maintain interest rates in December, according to the CME Group’s FedWatch tool.
While the CPI reading took precedence on Monday, Michael O’Rourke, Chief Market Strategist at JonesTrading, noted that investors were also digesting a downgrade in the U.S. credit outlook issued by Moody’s late on Friday. Moody’s adjusted the outlook on the U.S. credit rating to “negative” from “stable,” citing significant fiscal deficits and a decline in debt affordability.
This, coupled with the looming potential for a U.S. government shutdown over the weekend, contributed to investor hesitation in making significant decisions. U.S. House of Representatives Speaker Mike Johnson introduced a Republican stopgap spending measure to prevent a shutdown, but it faced swift opposition from lawmakers in Congress.
However, on Monday afternoon, top U.S. Senate Democrat Chuck Schumer tentatively expressed support for Johnson’s short-term funding bill to keep the government open past the weekend.
Closing figures for Monday revealed that the Dow Jones Industrial Average rose by 54.77 points (0.16%) to 34,337.87, the S&P 500 lost 3.69 points (0.08%) to 4,411.55, and the Nasdaq Composite dropped 30.37 points (0.22%) to 13,767.74.
In the current month, major U.S. stock indexes have rebounded, fueled by a stronger-than-expected earnings season and optimism that U.S. interest rates may be nearing their peak.
Among the S&P 500 sectors, energy emerged as the biggest gainer, finishing up 0.7%, while utilities experienced the most significant decline, falling 1.2%.
Boeing saw a notable rally, with a 4% increase on Monday after reports from Bloomberg News suggested that China is contemplating resuming purchases of 737 Max aircraft. Additionally, Dubai’s Emirates placed an order for 90 more Boeing 777X jets at the opening of the Dubai Airshow on Monday.
The S&P healthcare index was the second-largest percentage gainer, adding 0.6%. The top percentage gainer within this sector was Davita Inc, a dialysis company, which rose by 6.5%.
Other notable gainers included Insulet, up 5.6%, Dexcom, up 4.6%, and Abbott, gaining 1.9%, as analysts reacted to data about the cardiovascular benefits of Novo Nordisk’s weight-loss drug, Wegovy.
While Tesla shares contributed to a more than 4% increase, providing support to the consumer discretionary index, declines in heavyweight stocks such as Apple and Microsoft weighed down the S&P 500 technology index.
In terms of market breadth, advancing issues outnumbered declining ones on the NYSE by a 1.08-to-1 ratio, while on Nasdaq, a 1.03-to-1 ratio favored decliners.
The S&P 500 recorded 24 new 52-week highs and 7 new lows, while the Nasdaq Composite noted 52 new highs and 227 new lows.
On U.S. exchanges, a total of 9.34 billion shares changed hands, compared with the 10.97 billion recorded over the past 20 sessions.
