S&P 500 near flat as investors weigh chances of less aggressive rate hikes

The indexes were up, way up, most of the day, the Dow reaching a height of +300 by noon, before beginning a steady decline to break-even by 3 and closing down 112.  It was profit-taking in the morning reacting to Friday’s jobs report and then bet hedging in the afternoon anticipating a less than stellar CPI report later this week.  The consensus remains for high 77% odds of another ¼ point rate hike in February.  Volume was a little above average at 11.3 billion. 

Mon  January 9, 2023  5:06 PM

S&P 500 near flat as investors weigh chances of less aggressive rate hikes

By Caroline Valetkevitch

DJ: 33,630.61  +700.53       NAS: 10,569.29  +264.05        S&P: 3,895.08  +86.98     1/6

DJ: 33,517.65  -112.96        NAS: 10,635.65  +66.35          S&P: 3,892.09  -2.99        1/9

NEW YORK, Jan 9 (Reuters) - The S&P 500 index (.SPX) erased early gains to close nearly flat on Monday as expectations that the Federal Reserve will become less aggressive with its interest rate hikes were offset by lingering worries about inflation.  The Dow ended lower, and the Nasdaq Composite (.IXIC) ended well off the day's highs.  Investors are awaiting comments Tuesday from Fed Chair Jerome Powell, who some strategists expect could say more time is needed to show inflation is under control. Money market bets were showing 77% odds of a 25-basis point hike in the Fed's February policy meeting.

A consumer prices report due Thursday could be key for rate expectations, said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina. "The CPI report this week is going to be essential for fine-tuning the Fed funds futures market."  Investors also may have sold some shares after recent strong market gains, said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago. "You're seeing a little bit of profit-taking ahead of the CPI number due out this week."

The technology sector (.SPLRCT) gained as Treasury yields fell. Consumer discretionary stocks (.SPLRCD) also rose, with Amazon.com Inc (AMZN.O) up 1.5% after Jefferies said it saw cost pressures easing for the e-commerce giant in the second half of the year.  Also, S&P 500 companies are about to kick off the fourth-quarter earnings period, with results from top U.S. banks expected later this week.

The Dow Jones Industrial Average (.DJI) fell 112.96 points, or 0.34%, to 33,517.65, the S&P 500 (.SPX) lost 2.99 points, or 0.08%, to 3,892.09 and the Nasdaq Composite (.IXIC) added 66.36 points, or 0.63%, to 10,635.65.

Shares of Broadcom Inc (AVGO.O) fell in late trading to end down 2% after Bloomberg, citing people familiar with the matter, reported that Apple Inc (AAPL.O) plans to drop a Broadcom chip in 2025 and use an in-house design instead.  Friday's jobs report, which showed a moderation in wage increases, lifted hopes that the Fed might become less aggressive in its rate-hike push to reduce inflation.  Tesla Inc (TSLA.O) shares rose 5.9% after the electric-vehicle maker indicated longer waiting times for some versions of the Model Y in China, signaling the recent price cuts could be stoking demand.  Macy's Inc (M.N) fell 7.7% and Lululemon Athletica Inc (LULU.O) dropped 9.3% after both retailers issued disappointing holiday-quarter forecasts.

Volume on U.S. exchanges was 11.35 billion shares, compared with the 10.90 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 1.85-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored advancers.  The S&P 500 posted 13 new 52-week highs and two new lows; the Nasdaq Composite recorded 129 new highs and 32 new lows.