NEW YORK (`) –
There is a mixed mood on Wall Street on Monday as a week of potentially market-moving news lies ahead towards the end of the week.
The S&P 500 was 0.2% higher in early trading, having its first losing week in 10 years. The Dow Jones Industrial Average was down 166 points, or 0.4%, as of 9:40 a.m. Eastern time, as was the Nasdaq Composite, up 0.6%.
Boeing was the heaviest weight, pushing the Dow lower in early trading after one of its jets suffered an accident while flying over Oregon. It fell 8.8%. Spirit Aerosystems, which builds fuselages and other parts for Boeing, fell 13.3%.
Shares of oil and gas companies were also particularly weak after crude oil prices fell more than 4%. Exxon Mobil fell 3.2% and Chevron fell 2.3%.
But the rest of Wall Street held up better. Commercial Metals Co. rose 4.1% after reporting higher profit than analysts expected for its latest quarter. It said construction activity in North America was healthy, boosting demand for steel and helping to offset weaker conditions in Europe.
More earnings results will be available at the end of the week, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group, among others, set to open the S&P 500 earnings season for the final three months of 2023 on Friday.
The highlight of the week could be the release of the latest U.S. consumer inflation data on Thursday. A slowdown there has helped spark enormous hope on Wall Street that the Federal Reserve will soon see enough improvement to not just stop raising interest rates but start cutting them.
Hoping to combat high inflation, the Fed has already raised its key interest rate to its highest level since 2001, weighing on the economy and weighing on investment prices. Last month, the Fed said the situation had improved, and Wall Street expects it to start cutting rates as early as March.
Due to these expectations, government bond yields in the bond market have already fallen and remained relatively stable on Monday. The yield on the 10-year Treasury note fell to 4.02% from 4.05% late Friday. It topped 5% in October, its highest level since 2007, putting strong downward pressure on the stock market.
The resulting stock rally brought the S&P 500 near its all-time high. But that strength has also led some on Wall Street to say a pause in stocks is likely, at least in the near term. According to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, the market looks “extremely expensive.”
Critics also warn that Wall Street traders may be overly optimistic about the Federal Reserve's potential rate cuts this year. The Fed has suggested there might be three rate cuts in 2024, but traders have taken steps to achieve about double that. Such a high number is not likely unless there is a recession that forces the Fed to act, critics say.
For this reason, there is a lot of focus on corporate earnings, the growth of which could help support share prices.
Analysts expect companies in the S&P 500 to post 1.3% year-over-year earnings per share growth for the fourth quarter of 2023, according to FactSet. While that is a relatively meager number, it would only mark the second quarter of growth in a row.
The economy has remained robust so far, despite concerns about a looming recession emerging last year. This has helped protect companies' revenues. But their costs have also risen as inflation remains high across the economy, cutting into their profits.
Helen of Troy, the company behind brands including Hydro Flask, Osprey and Drybar, rose 1% after reporting higher-than-analysts expected earnings for its latest fiscal quarter. New CEO Noel Geoffroy said the company had performed better than expected despite “a continued challenging macro consumer environment.”
Elsewhere on Wall Street, the fallout from the accident involving an Alaska Airlines Boeing jet over the weekend was widespread. Alaska Air Group fell 4.2%. United Airlines, which flies the same Boeing model and also had to cancel flights due to the grounding, opened lower but quickly posted a small profit.
Stock markets abroad were mixed.
The Hang Seng in Hong Kong fell 1.9%, led by losses in real estate and technology stocks, while stocks in Shanghai fell 1.4%.
Real estate stocks slumped after Zhongzhi Enterprise Group, a major lender to real estate developers, filed for bankruptcy in Beijing. China also announced sanctions on five American defense contractors on Sunday in response to U.S. arms sales to Taiwan and U.S. sanctions against Chinese companies and individuals.
The announcement came ahead of an election in Taiwan that will determine the self-governing island's relations with China, which claims Taiwan as its own territory.
` writers Zimo Zhong and Matt Ott contributed.
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