Nasdaq 100, Dow Jones, S&P 500 News: Wall Street Struggles as Focus Shifts to Inflation Data

Mixed Performance in U.S. Stock Indexes

U.S. stock indexes showcased a varied performance at Monday’s mid-session, nearly reaching record highs set in March. The market’s movement is underpinned by anticipation of forthcoming inflation data and its implications for potential interest rate adjustments by the Federal Reserve in 2024.

At 16:00 GMT, the Dow Jones Industrial Average is trading 39419.82, down 93.02 or -0.24%. The S&P 500 Index is at 5214.18, down 8.50 or -0.16% and the Nasdaq 100 is trading 16355.33, up 14.46 or +0.06%.

Market Drivers

A combination of robust earnings and indications of a cooling labor market has fueled speculation of possible rate cuts. Following a multi-week rally, the major benchmarks are positioned close to their historic highs. Notably, strong earnings reports have acted as a catalyst, with 77.3% of the 459 S&P 500 companies that have reported so far surpassing profit expectations.

Inflation and Interest Rate Outlook

Investor focus is intensely set on the inflation report due on Wednesday, expected to reveal a 0.3% month-over-month increase in core consumer prices for April, translating to an annual rise of 3.6%. The market is largely discounting the possibility of a rate hike, with attention turning to the duration the Fed might maintain its rates and the potential timing of rate reductions. Current market pricing anticipates a 43 basis point reduction by the end of 2024, with a significant probability of a cut as early as September.

Corporate Earnings and Market Movements

This week is also crucial for corporate earnings, with major players like Home Depot, Walmart, and Cisco scheduled to report. GameStop shares surged 65%, influenced by the return of a key figure from the 2021 meme stock phenomenon, highlighting the ongoing volatility among heavily shorted stocks.

Short-Term Market Forecast

As traders digest these developments, the market’s direction will likely hinge on the inflation data and the Fed’s subsequent stance. A softer inflation read could confirm market expectations for a dovish pivot, potentially catalyzing further gains. Conversely, higher-than-expected inflation could temper expectations for rate cuts, injecting volatility into the markets. As such, investors remain watchful, with an eye on economic indicators and corporate financial health to guide their strategies in the coming days.

Technical Analysis

The E-mini Dow Jones futures contract is at risk of posting its first loss in nine sessions on Monday, after an earlier gain turned into a loss at the mid-session.

The rally fell short of the all-time high at 40358 with the market remaining within striking distance of the 50-day moving average support at 39062. Traders will need to monitor a test of this indicator since it represents the intermediate trend.