NEW YORK (AP) — After a roller-coaster end to last week that left them a little short of records, U.S. stocks traded relatively quietly on Monday.
The S&P 500 rose 0.1% in afternoon trading, quickly turning a 1.2% decline into a 1.1% gain. As of 2:56 p.m. ET, the Dow Jones Industrial Average was up 19 points, or 0.1%, and the Nasdaq Composite was up 0.2%.
Much of the focus is on interest rates and when the Federal Reserve will lower them to ease pressure on the economy and financial system. A series of reports suggesting that inflation and the economy remain higher than expected has forced Wall Street to hold off on predicting when interest rate easing will occur.
There are several flashpoints this week that could further shake up the forecast. On Wednesday, the latest monthly update on inflation as perceived by U.S. consumers will be released. Later in the week, a report on wholesale-level inflation and future inflation expectations among U.S. households will be released.
Federal Reserve Chairman Jerome Powell recently said he still expects to cut rates this year, but the central bank needs additional confirmation that inflation is on track to its 2% target. The Fed is keeping its key interest rate at the highest level in more than 20 years, hoping to keep the economy and prices low enough for investment to curb inflation. The risk of keeping interest rates too high for too long is that it could cause a recession.
But some Fed officials have also warned that if inflation remains stubbornly high, interest rates could remain high for an extended period of time. That has led some Wall Street traders to lower their expectations for the number of rate cuts this year from three to two. They had already slashed their forecasts from earlier this year, when many were expecting six or more cuts.
Traders now think the probability that the Fed will cut rates at its June meeting is about a coin flip, down from more than 70% chance a month ago, according to data from CME Group.
Lower interest rates not only make it easier for American households and businesses to borrow, they also encourage investors to pay higher prices for stocks and other investments. Stock prices have already soared due to such expectations.
U.S. stocks are hovering near record highs even as expectations for interest rate cuts this year have waned on hopes that a strong economy will boost corporate profits. Earnings and interest rates are the two main factors that determine stock prices.
Those expectations have extended the stock market’s gains beyond the handful of big tech stocks that accounted for most of last year’s gains. Energy producers in the S&P 500 have risen nearly 17% this year after falling nearly 5% last year on hopes that a recent rebound in energy prices will mean higher profits in the future.
It is also possible that the U.S. economy will continue to grow strongly while inflation slows. Goldman Sachs economist David Mericle expects that to be the case, in part because of the growing number of young immigrants working in construction and other industries, where wages are generally lower.
Friday’s surprisingly strong jobs report showed average hourly wages for workers trending in line with expectations, even as employers hired far more workers than expected last month.
But critics say the stock already looks expensive, given its steep rise of more than 20% from November to March. According to Lisa Charette, chief investment officer at Morgan Stanley Wealth Management, that means “achieving ambitious revenue projections has become paramount.”
“Economic growth is good, but we are not satisfied with its impact,” he said.
To that end, the latest earnings reporting season begins this week. Delta Air Lines, JPMorgan Chase, and other banks are the primary banks on the first day of the reporting period. Analysts expect S&P 500 companies to achieve their third consecutive quarter of year-over-year growth.
Real estate investment trusts led the market after Apartment Income REIT announced it had agreed to be acquired by Blackstone for about $10 billion in cash, including assumed debt. Apartment Income REIT, also managed by AIR Communities, rose 22.5%.
Trump Media & Technology Group was a loser on Wall Street. The company, which operates the Truth Social platform, has seen its stock price fluctuate wildly on a daily basis, with experts pointing out that the stock price fluctuates daily based more on the expectations of Trump fans than on the company’s profit outlook. There is. It fell by 10.9%.
In the bond market, U.S. Treasury yields rose as expectations for interest rate cuts receded, further accelerating their year-to-date rise. The yield on the 10-year U.S. Treasury rose to 4.42% from 4.40% late Friday, down from below 3.90% at the start of the year.
In overseas stock markets, stock prices fell 0.7% in Shanghai, but indexes across Europe and Asia mostly rose.
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AP Business writers Matt Ott, Yuri Kageyama and Alex Veiga contributed.
