The S&P 500 made a halt just ahead of the release of US inflation data. The market closed slightly lower on Monday as investors remained cautious before an important reading on inflation and economic outlook, which could potentially hint about the future of interest rates in the US.
Markets ended last week with an amazing rally on Friday, but turned the tables on Monday just ahead of the inflation (CPI) data due to be released on Tuesday morning. Economists estimate that the headline inflation would ease up a little from 3.7% in September to around 3.3% in October. However, no change is expected in the core prices.
Chief portfolio manager for equities at Northwestern Mutual Wealth Management Company, Matt Stucky said that, labor market and the update on CPI, “are clearly the drivers for all the matters in financial markets, because it dictates where the Federal Reserve goes from here.”
He viewed that, “the market expects that the Fed is done with interest rate hikes and for that to be true, you need to have continued progress on the inflation front, along with labor market cooling.”
Market is pricing a nearly 86% chance that the Fed will hold the policy rate in December.
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Other Factors to be Noted
Apart from the main reason discussed earlier that the S&P 500 made a halt ahead of US inflation data, there are several other factors that played their role in pausing the market on Monday.
As noted by Chief market strategist at JonesTrading Michael O’Rourke, that they were also looking at a weaker US credit outlook. Moody’s report published on Friday lowered the US credit rating outlook from “Stable” to “Negative”, quoting a decline in debt affordability and large fiscal deficits.
This added to the markets’ reluctance to make big trading decisions ahead of the deadline by the end of the week that could result in a US government shutdown over budget issues.
MIke Johnson, US house of representative speaker, unveiled a stopgap spending measure on Saturday that was aimed at preventing a government shutdown, but it failed to amass support for both the parties in congress.
However, Chuck Schumer, a top US Senate Democrat, expressed support on Monday for Johnson’s short term funding bill that would keep the government going over the weekend.
DONT FORGET: Fed kept rates unchanged, Powell upgraded economic outlook
Market Tracked
The S&P 500 lost 0.08% to close at 4.411.55 points, and the Nasdaq composite was down by 0.22% to close at 13,767.74. However, the Dow Jones Industrial Average responded positively and closed 54.77 points or 0.16% higher to close the session at 34,337.87 points.
All three major US stock indexes have seen a rebound in their activity so far this month, aggravated by stronger than expected earnings in the third quarter and diminishing hopes of further hikes in interest rates.
Among the 11 major sectors listed in the S & P 500, the energy sector gained the most, closing 0.7% higher while the utilities sector lost the most to end 1.2% lower. The healthcare sector was the second larger beneficiary in S&P 500 adding almost 0.6%.
Dow Jones also rallied due to the recent activities on Boeing after it was reported that China is considering resuming the purchase of 737 Max aircraft, and Emirates placing an order for 90 additional 777X jets, leading it to go up by almost 4%.
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