US stock indexes closed little changed on Monday after blockbuster jobs data last week reinforced expectations the Federal Reserve will crack down on inflation, while a revenue warning from chipmaker Nvidia reminded investors of a slowing US economy.
Stocks retreated from earlier highs as last week’s blowout labor market report was initially seen as a sign the economy could withstand aggressive interest rate hikes by the Fed to tame inflation running at four-decade highs.
Investors now await consumer price data on Wednesday to gauge whether the Fed might ease a bit in its inflation fight and provide better footing for the economy to grow.
“The CPI data will help to confirm if the Fed’s tightening efforts have been successful in starting to tame inflation or if continued Fed tightening is needed,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management.
According to preliminary data, the S&P 500 lost 5.19 points, or 0.13 per cent, to end at 4,140.00 points, while the Nasdaq Composite lost 12.12 points, or 0.10 per cent, to 12,645.43. The Dow Jones Industrial Average rose 30.76 points, or 0.09 per cent, to 32,834.23.
The S&P 500 has bounced back 14 per cent from mid-June lows. But signs of inflation running too hot could cement the Fed’s case for aggressive monetary policy tightening.
Anthony Saglimbene, chief market strategist at Ameriprise in Troy, Michigan, said the market was due to pull back at some point as traders test the recent rebound.
“If we can hold those mid-June levels, it would be another sign that maybe this is more than just a bear market rally and the market is actually trying to recover and anticipate a better environment ahead,” Saglimbene said.
“Maybe we can get a little bit higher by year end, but that’s if everything lines up perfectly,” he said, adding that the University of Michigan’s preliminary consumer sentiment survey for August on Friday also will be closely watched.
“That’s the tug of war between these data sets that tell the story about, ‘Hey, are we going to turn into a recession or avoid one?’” US rate futures have priced in a 67.5 per cent chance of a 75-basis-point hike at the Fed’s next meeting in September, up from about 41 per cent before the labor market data beat market expectations.
The information technology sector fell after chipmaker Nvidia Corp slid as the company warned it expects second-quarter revenue to decline 19 per cent from the prior quarter to about $6.7 billion due to weakness in gaming.
The Philadelphia SE Semiconductor index declined, while value stocks outpaced a drop in growth.
Offsetting losses on the Nasdaq, megacap Tesla rose as the US electric-car maker signed contracts worth about $5 billion to buy battery materials from nickel processing companies in Indonesia, according to a CNBC report.
Shares of US automakers jumped after the US Senate on Sunday passed a $430 billion bill to fight climate change that created a $4,000 tax credit for used electric vehicles and provides billions in funding for their production.
Rivian Automotive Inc, Ford Motor Co, General Motors Co and Lordstown Motors Corp all rose.
Signify Health Inc jumped on a media report that CVS Health Corp was looking to buy the health technology company.
Palantir Technologies Inc dropped after the data analytics software company lowered its annual revenue forecast as the timing of some large government contracts remained uncertain.
Tyson Foods Inc fell after missing quarterly profit expectations.
