NEW YORK (AP) — Stocks closed lower on Wall Street, easing back after posting a big gain last week on hopes that the worst of the nation’s inflation may finally have passed. The S&P 500 lost 0.9% Monday after drifting between gains and losses for much of the day. Some analysts have called Wall Street’s rally from last week overdone, saying one month of encouraging data isn’t enough to say it’s soon to be under control. Fed officials have also urged caution, though its vice chair on Monday called it reassuring and said smaller rate hikes may be on the way.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Wall Street is making modest moves in mixed trading Monday, as stocks hold onto most of the huge gains made last week on hopes the worst of the nation’s inflation may finally have passed.
The S&P 500 was 0.1% higher in afternoon trading after drifting between losses and gains several times through the day. The Dow Jones Industrial Average was up 75 points, or 0.2%, at 33,823, as of 3:10 p.m. Eastern time, and the Nasdaq composite was virtually down 0.1%.
Wall Street is coming off its best week since June, after investors took an encouraging report on inflation to mean the Federal Reserve may ease up on its fusillade of interest-rate hikes meant to get prices under control. Such rate hikes have raised worries about a possible recession sinking the economy, while also dragging down prices for stocks, bonds and cryptocurrencies.
Some analysts have called Wall Street’s recent rally overdone, including a 5.5% surge for the S&P 500 on Thursday alone, saying one report does not mean the coast is clear, even if it was encouraging. Some officials at the Federal Reserve have also urged caution, with Fed Governor Christopher Waller saying the better-than-expected reading on inflation for October “was just one data point” and that “everybody should just take a deep breath.”
But on Monday, stocks got a boost after Fed Vice Chair Lael Brainard gave comments that investors took as a hint that the worst of the Fed’s rate hikes may have passed.
“The inflation data was reassuring, preliminarily,” she said. “It will probably be appropriate, soon, to move to a slower pace of rate increases.”
In each of its last four meetings, the Fed has hiked its key overnight rate by a big 0.75 percentage points, which is triple the usual amount. Bets have increased since last week’s inflation report that the Fed’s next move will be an increase of only 0.50 percentage points. While that’s still a big increase relative to history, investors are starving for any indication the Fed may ease up on its rate hikes.
Even before last week's report on inflation, Fed Chair Jerome Powell already said such a dial down in the size of rate hikes may be imminent. But he also said the Fed nevertheless could still ultimately take rates higher than earlier expected, and that it may hold rates at that high level a while to make sure inflation stays under control.
Fed officials have been reiterating how the Fed's campaign against high inflation still looks to be a long one.
“Quit paying attention to the pace and start paying attention to where the endpoint is going to be," Waller said. "Until we get inflation down, that endpoint is still a ways out there.”
Uncertainty about the Fed's path on rates helped have the stocks in the S&P 500 nearly evenly split between winners and losers.
Hasbro fell 8.9% for the largest loss in the index after analysts in a BofA Global Research report raised concerns the company may be overproducing cards for its "Magic: The Gathering" game, threatening to undercut a lucrative business.
On the winning side was Moderna, which climbed 6.1% after reporting encouraging data on its bivalent vaccine targeting COVID-19.
Bond yields rose. The yield on the 10-year Treasury, which helps set mortgage rates, rose to 3.87% from 3.81% late Thursday. Bond markets were closed Friday for Veterans Day.
Crypto-related stocks kept whipsawing following the implosion last week of FTX, a major crypto trading exchange. Coinbase, another crypto exchange platform, was off 5.7%.
Several economic reports due this week could offer more clues about where inflation is heading.
On Tuesday, the government will issue its October report on prices at the wholesale level. Economists say inflation there likely slowed to 8.3% from September’s 8.5% rate for year-over-year price changes.
On Wednesday, markets will see how resilient U.S. households have been in their spending when the government gives its latest monthly update on sales at retailers.
Economists say retail sales likely grew 0.9% in October from a month earlier, a much stronger showing than September's flat performance. The data, though, does not take inflation into account and could be a reflection of nothing more than higher prices being charged at the register.
Retailers could offer more color on that, with a long line of them scheduled to say this week how much profit they earned during the summer.
Home Depot and Walmart report earnings on Tuesday. Target reports its results on Wednesday, and Macy's reports results on Thursday.
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AP Business Writers Yuri Kageyama and Matt Ott contributed to this report.
Damian J. Troise And Stan Choe, The Associated Press
