U.S. stock indexes are ticking a bit higher Tuesday, on track for another quiet day ahead of some potential fireworks later in the week. The S&P 500 was up 0.3% in early trading, a day after remaining at a virtual standstill. The Dow Jones Industrial Average was up 67 points, or 0.2%, and the Nasdaq composite was 0.4% higher.
Quick Read
- Modest Gains: U.S. stock indexes, including the S&P 500, Dow Jones, and Nasdaq, experienced slight increases in early trading, continuing a period of relative calm.
- Anticipated Reports: The financial market awaits potentially impactful reports later in the week, including an update on U.S. consumer-level inflation and corporate earnings for the first quarter.
- Inflation and Interest Rates: Wall Street’s focus is on whether inflation rates will decrease sufficiently to prompt the Federal Reserve to cut interest rates, with current expectations lower than earlier in the year.
- Federal Reserve’s Stance: The Fed’s high-interest rate policy, aimed at curbing inflation, raises concerns about the potential for a recession if rates remain elevated for too long.
- Corporate Profit Expectations: With the S&P 500’s significant gains since last autumn, there’s pressure on companies to demonstrate strong profit growth to justify current stock valuations.
- Inflation Update Speculation: Bank of America strategists anticipate a possible easing in inflation, excluding food and energy costs, which could influence traders’ expectations for a rate cut in June.
- Commodity Prices: Despite the rise in oil and metal prices, their impact on core inflation is considered limited unless there’s a significant surge beyond previous highs.
- Sector Performance: Mining companies, benefiting from rising metal prices, contributed to the S&P 500’s gains, with Newmont and Freeport-McMoRan among the notable advancers.
- Norfolk Southern Settlement: The railroad company’s stock rose after announcing a $600 million settlement related to a train derailment, despite reporting preliminary earnings below expectations.
- Bond Market Movement: Yields on 10-year Treasury bonds slightly decreased, reflecting minor adjustments in the bond market.
- Global Markets: European and Asian stock markets showed mixed results, with investors in Europe awaiting the European Central Bank’s upcoming interest rate decision.
The Associated Press has the story:
Wall Street ticks higher as bond yields ease ahead of inflation report
Newslooks- NEW YORK (AP) —
U.S. stock indexes are ticking a bit higher Tuesday, on track for another quiet day ahead of some potential fireworks later in the week.
The S&P 500 was up 0.3% in early trading, a day after remaining at a virtual standstill. The Dow Jones Industrial Average was up 67 points, or 0.2%, and the Nasdaq composite was 0.4% higher.
Oil prices were also listless and little changed, while Treasury yields were easing a bit in the bond market. Traders are making their final moves before the back half of this week brings several potentially market-moving reports, including Wednesday’s highly anticipated update on inflation at the U.S. consumer level. Big U.S. companies will also begin delivering their reports for how much profit they made during the first three months of the year.
The question hanging over Wall Street is whether inflation will cool enough to convince the Federal Reserve to deliver the cuts to interest rates that traders are craving and have been betting on. Some doubts have crept in following a series of hotter-than-expected reports on the economy, and traders are now expecting just two or three cuts to rates this year. Some are even talking about the possibility of zero cuts. That’s down from expectations for six or seven cuts at the start of the year, according to data from CME Group.
The Fed’s main interest rate has been sitting at its highest level in more than two decades, and the fear is that rates left too high for too long can cause a recession.
If fewer cuts arrive this year, the onus will be on companies to deliver strong growth in profits to justify the big moves stock prices have made since autumn. The S&P 500 soared more than 20% from November through March and set multiple records along the way. Critics say stock prices look expensive on several measures, and either profits need to rise or interest rates need to fall to make them look more reasonable.
Strategists at Bank of America are looking for Wednesday’s inflation update to show a cooldown after ignoring food and energy prices, which can zigzag sharply. Such a result would likely increase traders’ expectations for a cut to rates in June, which the market currently sees as slightly better than a coin flip’s probability.
While a jump in oil prices this year has raised worries about a feedthrough into inflation, oil would likely need to rise “well above levels seen even in the peak Russia-Ukraine commodity price spike for a meaningful impact on core inflation,” Bank of America rates strategist Meghan Swiber said in a BofA Global Research report.
A barrel of benchmark U.S. crude added 0.1% to $86.50, bringing its gain for the year so far to nearly 21%. Brent crude, the international standard, rose 0.1% to $90.43.
Besides oil, prices for metals have also been rising this year, and gold in particular has hit records. Mining companies were helping to lead the S&P 500 with some of the bigger gains in the index. Newmont rose 3.3%, and Freeport-McMoRan gained 3%.
Norfolk Southern rose 1.9% even though the railroad reported preliminary earnings results for the first quarter that were shy of analysts’ expectations.
It also agreed to pay $600 million in a class-action lawsuit settlement related to a fiery train derailment last year in eastern Ohio. The company said the agreement, if approved by the court, will resolve all class action claims within a 20-mile radius from the derailment and personal injury claims within a 10-mile radius for those choosing to participate.
In the bond market, the yield on the 10-year Treasury eased to 4.38% from 4.42% late Monday.
In Europe, stock indexes were mixed ahead of a decision by the European Central Bank on Thursday about interest rates. Many investors expect it to hold rates steady.
Stock indexes were also mixed in Asia, with Tokyo’s Nikkei 225 jumping 1.1% but South Korea’s Kospi falling 0.5%.
