Stocks were little changed Monday as investors contemplated a potential slowdown in rate hikes from the Federal Reserve and braced for a busy week of earnings.
The Dow Jones Industrial Average traded 28 points lower, or 0.08%, while the S&P 500 added 0.14%. The Nasdaq Composite last traded 0.4% higher.
Investors weighed the possibility that the Fed is preparing to slow the pace of its inflation-fighting rate hikes. Economic data released last week showed a decline in wholesale prices and retail sales, along with commentary from central bank officials, seemed to signal a slowdown.
Remarks from Fed Governor Christopher Waller Friday seeming to favor a quarter percentage point rate increase at the next meeting lifted investors’ hopes for a downshift. A Wall Street Journal report Sunday raised the possibility of a spring pause to rate increases — a sign that the Fed could be nearing the end of its rate hiking campaign.
“With investors growing more confident on the inflation side, it is clear they are now looking beyond the current hiking cycle, to an eventual pause and potentially even cuts down the line,” wrote Deutsche Bank strategist Henry Allen in a note to clients Monday. “But with investors now priced for good news on inflation, the risk is that if inflation does prove more persistent, then we could be in another bear market rally just as we saw last summer.”
Markets have priced in a 99.7% chance of a 25-basis point hike, according to CME Group data, which would bring the interest rate to a targeted range of 4.5%-4.75%.
Earnings reports could keep the market on edge, with about 40% of the Dow scheduled to release their latest financial results and offer more insight into how companies are weathering inflation and interest rates. Some big names on deck include Microsoft, IBM, Tesla, Visa and Mastercard.
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