US close: Stocks mixed ahead of Tuesday's CPI data
US stocks finished well off their daily lows on Monday but the major equity indices still put in a mixed performance as investors choose to remain cautious ahead of key inflation data.
The Dow Jones Industrial Average rose 0.16%, while the S&P 500 fell 0.08% and the Nasdaq declined 0.22%. That follows some impressive gains on Wall Street last Friday, which saw the Nasdaq surge 2.05% – its biggest one-day gain since May – the Dow rise 1.2% and the S&P 500 jump 1.6%.
The consumer price index, due out at 0830 ET on Tuesday, is expected to show that annual inflation slowed to 3.3% in October from 3.7% the month before. However, core inflation (which excludes volatile items like food and energy) is forecast to remain at September's level of 4.1% – still firmly above the Federal Reserve's 2% target.
"Two things will be important this month. The first will be the decline in gasoline prices driven by lower oil and gasoline cracks. This will impact headline inflation but not core. The second is the increase in medical care services, which could shift core inflation higher by 5-10 bps," said analysts at research firm Macro Hive in an email.
Month-on-month, core inflation is widely expected to stay at 0.3%, though analysts at Pantheon Macroeconomics are predicting a print of 0.4%.
"If the core is 0.4%, Treasury yields will rise, the market-implied chance of a December rate hike will increase, perhaps sharply, and stocks probably will sell off. We’re sticking to our view that the Fed won’t hike next month, but we have always thought the risk is not negligible," Pantheon said in a research note.
Fed chair Jerome Powell – along with other policymakers – delivered somewhat hawkish comments last week, saying that the central bank wouldn't hesitate to tighten monetary policy further to bring inflation down towards the target.
Also weighing on investors' minds on Monday was yet another potential government shutdown, with Congress having just four days left to pass a new stop-gap bill before the current one runs out on 17 November. Speaker Mike Johnson unveiled a new proposal at the weekend to push funding into January, but measures faced opposition from both parties. On Friday, ratings agency Moody's cut its rating outlook on the US economy from 'stable' to 'negative'.
Boeing jumps on order optimism
Boeing shares were flying 4% higher on reports that China might call an end to its four-year suspension of Boeing 737 Max airlines ahead of Joe Biden's meeting with Xi Jinping's at the APEC summit this week. The aeroplane manufacturer also announced a batch of new orders from the sidelines of the Dubai airshow, including a $52bn order of 95 aircraft from Emirates.
Electric car maker Tesla finished higher on the news that it won't allow buyers of its Cybertrucks to sell them within the first year of ownership without a $50,000 fine.
Food products group Tyson Foods dropped after missing estimates with its fourth-quarter sales and guided to flat revenues for the upcoming year.