U.S. stocks were little changed on Monday despite a strong rally in the previous session as investors waited for the release of inflation data later in the week.
The S&P 500 was up 1.85 points, or 0.05 percent, at 4,137.90, while the Nasdaq Composite added 19.31 points, or 0.19 percent, at 12,254.72. The Dow Jones Industrial Average was down 53.96 points at 33,620.44.
Among individual stocks, Catalent Inc. shares dipped as the contract drug manufacturer saw lower revenue and core profit in 2023. Tyson Foods tanked on a surprise second-quarter loss and a cut in its annual revenue forecast. A rebound in shares of regional lenders also ran out of steam by midday, with the KBW Regional Banking index falling after posting its best single-day performance in seven weeks on Friday.
Investors are now awaiting the Labor Department’s inflation reading on Wednesday, which is expected to show the consumer price index (CPI) climbed 0.4 percent in April after gaining 0.1 percent in the previous month. Producer prices, weekly jobless claims and consumer sentiment data are all scheduled for the week.
The data will help investors gauge whether the Federal Reserve’s aggressive tightening cycle, including its most recent 25 basis point hike last week, is helping to tamp down inflation and whether fears of stagflation are founded.
Warren Buffett’s Berkshire Hathaway Inc.’s Class B shares rose after posting a $35.5 billion first-quarter profit, boosted by gains from stocks such as Apple. Shares of Zscaler Inc. also rose after the cloud security company raised its annual forecast.
However, Michael James, managing director of equity trading at Wedbush Securities, said the overall market is expected to remain somewhat range-bound until there is something to disprove the thesis that inflation will remain higher for longer and that the U.S. is heading into a recession.
Other market updates ahead U.S. debt ceiling, CPI data
Global equity markets saw a slight uptick while the dollar remained stable for the day as investors awaited talks in Washington about the U.S. debt ceiling that could shed light on Federal Reserve monetary policy.
This week, U.S. President Joe Biden and top Republican and Democrat lawmakers from Congress will attempt to resolve a three-month standoff over the $31.4 trillion U.S. debt ceiling to avoid a potentially disastrous default by the end of May. Biden will meet with Republican House of Representatives Speaker Kevin McCarthy on Tuesday for the first time since February.
Experts warn that market turmoil may create political cover for Biden and McCarthy to come to a deal, which could lead to market disappointment and volatility. Spouting Rock Asset Management’s Rhys Williams said that although markets have performed well this year, it has been a narrow market with only a few stocks driving most of the gains.
The Fed’s interest rate cut expectations may be adjusted following Wednesday’s expected CPI data that could show a moderate slowdown in core inflation. BTIG’s Tom di Galoma believes the Fed is done with tightening.
The dollar’s performance against the yen was better, with a 0.22 percent rise as the Bank of Japan remains the only developed world central bank that has yet to tighten policy.
Meanwhile, U.S. banks saw declining loan demand from businesses and consumers over the first months of the year after tightening credit standards, according to Fed survey data released on Monday.
Bullion recovered after a sharp drop in the previous session, ahead of the inflation data that could clarify the outlook for U.S. interest rates, while spot gold added 0.3 percent to $2,022.37 an ounce.