The S&P 500 Slips as Investors Await Key Inflation Data
The stock market experienced a slight dip on Monday as the S&P 500 retreated from its record high achieved last Friday. Investors eagerly awaited key inflation data, causing some hesitation in the market. The S&P 500 fell by 0.38% to close at 5,069.53, while the Nasdaq Composite declined by 0.13% to reach 15,976.25. The Dow Jones Industrial Average also slipped by 62.30 points, or 0.16%, closing at 39,069.23.
In a significant development, Amazon joined the 30-stock Dow on Monday, taking the place of Walgreens Boots Alliance. The Dow’s holdings are weighted based on stock price rather than market cap. With the inclusion of Amazon, the index’s exposure to tech and consumer retail will increase. However, Amazon shares experienced a slight decrease of 0.15%.
The pressure on stocks was further intensified by the rise in Treasury yields on Monday. The 10-year Treasury yield increased by approximately one basis point to 4.276%. Despite these challenges, stocks entered the week on a positive note after the S&P 500 and the Dow reached record highs on Friday, largely due to Nvidia’s impressive earnings.
Investors are now closely monitoring whether the momentum generated by artificial intelligence (AI) can be sustained amidst ongoing economic and inflation risks. Their attention is particularly focused on the monthly personal consumption expenditures price index, which is considered the Federal Reserve’s favored inflation gauge and will be released on Thursday.
Alex McGrath, Chief Investment Officer at NorthEnd Private Wealth, believes that the current AI-powered rally appears sustainable. He stated, “Where Nvidia and a lot of other semiconductor companies guided to seems to have put some credence into the thought that AI can continue to power this rally.”
Despite concerns surrounding inflation, investor sentiment towards stocks has risen due to a better-than-expected earnings season. John Stoltzfus, Oppenheimer’s Chief Investment Strategist, noted that this positive sentiment persists “even as markets have had to digest the likelihood that the Federal Reserve will remain highly vigilant regarding sticky inflation when it comes to considering if, when, and by how much it might cut interest rates this year.”
In other news, new home sales in January fell below economists’ estimates due to elevated mortgage interest rates. The Census Bureau and Department of Housing and Urban Development reported that sales of new single-family homes increased by 1.5% to reach 661,000 for the month. However, this figure missed the Dow Jones estimate of 680,000 and a 2.4% increase.
Looking ahead, there are several economic releases scheduled for the week. On Tuesday, January durable orders data will be released, followed by January wholesale inventories on Wednesday. Thursday will see the release of consumer spending and PCE numbers.
As investors eagerly await the key inflation data and navigate various economic indicators, the stock market remains in a state of cautious optimism. The impact of AI on the market’s momentum and the Federal Reserve’s approach to inflation will be closely monitored in the coming days.