NEW YORK (AP) — Stocks gave up early gains and ended Wall Street mixed. Weakness in healthcare companies worsened during the day. Stocks are down from their first weekly gain in five on hopes that the Federal Reserve will moderate rising interest rates that are roiling the economy as inflation cools. The S&P 500 ended just slightly lower on Monday after opening as much as 1.4% higher. Gains in tech companies were mostly contained, leaving the Nasdaq 0.6% higher. The Dow fell 0.3%. Treasury yields fell further as traders adjust bets on what the Fed will do.
THIS IS A NEWS UPDATE. An earlier AP story follows below.
NEW YORK (AP) — Stocks were mostly ticking higher on Wall Street Monday, contributing to gains on hopes that the Federal Reserve may moderate the rate hikes that are roiling the economy as inflation cools.
The S&P 500 was 0.2% higher in its first trade since closing its first winning week in five. The Dow Jones industrial average was down 79 points, or 0.2%, at 33,551 as of 3:05 p.m. ET, and the Nasdaq was up 1%.
The positive start to the year for the stock market came as data offered hope that the nation’s high inflation will continue to ease from its summer peak, allowing the Fed to halt rate hikes sooner than otherwise. Such rate hikes have already sharply slowed parts of the economy, and there are fears that another big increase could trigger a painful recession.
Treasury yields fell further on Monday as traders adjust bets on what the Fed will do. They fell on Friday after data showed workers were getting weaker raises than in previous months. While this is discouraging for workers who still can’t see wages keeping up with rising prices, it could ultimately mean less upward pressure on inflation.
The next big indicator for the market will be Thursday’s consumer grade inflation report. Economists expect inflation to have slowed further to 6.5% last month from 7.1% in November.
The yield on the two-year Treasury note, which tends to track expectations for Fed action, fell to 4.19% from 4.26% late Friday and to more than 4.70% in November. The yield on the 10-year Treasury note, which helps determine rates for mortgages and other key loans, fell to 3.51% from 3.57% on Friday.
Lower rates tend to help high growth and technology stocks in particular, which were among the market leaders on Monday.
Tesla jumped 7.5%, Nvidia rose 7.1% and Advanced Micro Device climbed 7%, one of the biggest gains in the S&P 500. About three out of five stocks in the index rose.
But analysts warn that another bump is almost certainly on the way for the stock market. Even as inflation slows, the Fed has vowed to raise rates further and keep them high for a while to make sure the job of inflation is done.
And the parts of the economy that do best when rates are low have already shown signs of sharp pain, as the Federal Reserve raised its key overnight rate to a range of 4.25% to 4.50% from roughly zero a year ago.
There are also warnings about what look to be lackluster earnings reports from companies grappling with higher labor costs and other expenses eating into their profits. Earnings season is set to begin on Friday, which could mark the first year-over-year decline in earnings per share for S&P 500 companies since 2020.
“With 2022, investors are now focused primarily on the earnings outlook for the coming year,” Goldman Sachs strategists wrote in a note.
For the full year of 2023, he sees zero growth in S&P 500 earnings per share. And that’s if the economy avoids recession. If the recession does hit, as many on Wall Street suspect, they say profits could fall 11%. This is key because earnings are one of the main levers that determine stock prices.
Some retailers offered discouraging financial updates on Monday. Macy’s shed 7% and Lululemon Athletica fell 9.1% after issuing cautious forecasts.
Stock markets in Europe and Asia gained ground. A Chinese financial news site quoted a top central bank official as saying that China’s more than two-year crackdown on internet companies is almost over.
E-commerce giant Alibaba rose 3.5%. Alibaba affiliate and leading Chinese financial technology provider Ant Group announced on Friday that its founder, e-commerce billionaire Jack Ma, will relinquish control of the company. The move follows the Chinese government’s efforts to rein in Ma and the country’s technology sector more broadly.
AP Business Writers Elaine Kurtenbach and Matt Ott contributed to this report.
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