Stocks pause as key inflation data eyed

It was another seesaw day for tech, though both the S&P and Nasdaq did manage to stay modestly in the black. Not so for the traditional Dow which took a near 200-point hit until noon but then recovered in the afternoon to close at a more modest 96 point loss.  The consensus is that the market is on hold pending more inflation data but the dour expectation is that the PCE will show inflation on a modest rise and with three Fed officials today saying there’s “no rush to cut rates,” investors are expecting that “they are not going to get what they want and so backing up.” 

And more pessimism – “It will fade in a hurry if the PCE comes in as expected or hotter than expected.” The odds now for a June cut have fallen to a mere 59%, a very big change from the near 100% two months ago.  Coming later this week, and another reason for the caution, is a 2^nd GDP reading as well as jobless and manufacturing data.  Volume was below average at11.2 billion. 

Stocks pause as key inflation data eyed

By Chuck Mikolajczak

Tue February 27, 2024  4:28 PM

DJ: 39,069.23  -62.27         NAS: 15,976.25  -20.55       S&P: 5,069.53  -19.27      2/26

DJ: 38,972.41  -96.82         NAS: 16,035.30  +59.05      S&P: 5,078.18  +8.65       2/27

NEW YORK, Feb 27 (Reuters) - U.S. stocks closed near flat on Tuesday ahead of inflation and other economic data that could shed light on the possible timing of a Federal Reserve interest rate cut.  As corporate earnings season winds down, investors refocused on economic data and the likely path of U.S. rates. Equities have been on a furious rally for weeks, fueled largely by enthusiasm about artificial intelligence-related stocks that lifted the S&P 500 and Dow Jones industrials to record levels while leaving the Nasdaq just short of a new high.  With the latest employment report not due until next week, the spotlight is on Thursday's January personal consumption expenditures price index (PCE), the Fed's preferred inflation gauge.  Should the PCE reading resemble recent inflation readings on consumer and producer prices, it could compel the Fed to hold rates at current levels longer than the market is anticipating.

On Monday, Kansas City Federal Reserve Bank President Jeffrey Schmid used a debut speech on policy to signal that he remains focused on the threat of high inflation and is in no rush to cut rates.  In addition, Fed Governor Michelle Bowman on Tuesday indicated she is in no hurry to cut rates, given upside risks to inflation that could stall progress or even cause price pressures to resurge.  "It's been toppy, it feels like it is clearly a little bit stretched," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.  "The market is getting at least attuned to the fact they are not going to get what they want and so it is backing up. ... You're going to see it fade in a hurry if the PCE number comes in as expected or hotter than expected."

The Dow Jones Industrial Average (.DJI), opens new tab fell 96.82 points, or 0.25%, to 38,972.41. The S&P 500 (.SPX), opens new tab gained 8.65 points, or 0.17%, at 5,078.18 and the Nasdaq Composite (.IXIC), opens new tab rose 59.05 points, or 0.37%, to 16,035.30.

Expectations for a cut of at least 25 basis points (bps) by the Fed at its June meeting stand at 59.1%, down from the near certainty at the end of January, according to the CME Group's FedWatch tool, opens new tab. Other data due this week which could help shape expectations from the Fed include the second estimate of gross domestic product, jobless claims and manufacturing activity.

U.S. consumer confidence retreated in February after a three-month gain, and orders for long-lasting U.S. manufactured goods fell more than expected in January, data on Tuesday showed.  Stocks gained some late support from Apple (AAPL.O), opens new tab, which erased earlier declines to close up 0.81% after Bloomberg News reported the iPhone maker canceled work on its electric car, shifting some employees to its artificial intelligence project.  But UnitedHealth (UNH.N), opens new tab dropped just before the closing bell to end down 2.27% as the biggest drag on the Dow after WSJ reported the U.S. Department of Justice has launched an antitrust investigation into the company.  Viking Therapeutics (VKTX.O), opens new tab surged 121.02% after its experimental drug to treat obesity helped patients achieve "significant" weight loss in a mid-stage study.  In turn, Amgen (AMGN.O), opens new tab, which is also developing a weight-loss drug, lost 2.75%.

Advancing issues outnumbered decliners by a 1.45-to-1 ratio on the NYSE while on the Nasdaq, advancing issues outnumbered decliners by about 1.6-to-1.  The S&P 500 posted 46 new 52-week highs and no new lows while the Nasdaq recorded 253 new highs and 66 new lows.

Volume on U.S. exchanges was 11.21 billion shares, compared with the 11.71 billion average for the full session over the last 20 trading days.