Stocks stall as key inflation data awaited

© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 23, 2024. REUTERS/Brendan McDermid/File Photo

By Chuck Mikolajczak

NEW YORK (Reuters) -U.S. stocks held near flat on Tuesday ahead of inflation and other economic data that could shed light on the possible timing of a Federal Reserve interest rate cut.

As corporate earnings season winds down, investors refocused on economic data and the likely path of U.S. rates. Equities have been on a furious rally for weeks, fueled largely by enthusiasm about artificial intelligence-related stocks that lifted the S&P 500 and Dow Jones industrials to record levels while leaving the Nasdaq just short of a new high.

With the latest employment report not due until next week, the spotlight is on Thursday’s January personal consumption expenditures price index (PCE), the Fed’s preferred inflation gauge.

Should the PCE reading resemble recent inflation readings on consumer and producer prices, it could compel the Fed to hold rates at current levels for longer than the market is anticipating.

On Monday, Kansas City Federal Reserve Bank President Jeffrey Schmid used a debut speech on policy to signal that he remains focused on the threat of high inflation and is in no rush to cut rates.

In addition, Fed Governor Michelle Bowman on Tuesday indicated she is in no hurry to cut rates, given upside risks to inflation that could stall progress or even cause price pressures to resurge.

“It’s been toppy, it feels like it is clearly a little bit stretched,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

“The market is getting at least attuned to the fact they are not going to get what they want and so it is backing up. … You’re going to see it fade in a hurry if the PCE number comes in as expected or hotter than expected.”

The Dow Jones Industrial Average fell 144.18 points, or 0.37%, to 38,924.12, the S&P 500 lost 1.28 points, or 0.03%, at 5,068.25 and the Nasdaq Composite gained 26.20 points, or 0.16%, at 16,001.38.

Expectations for a cut of at least 25 basis points (bps) by the Fed at its June meeting stand at 59.1%, down from the near certainty at the end of January, according to the CME Group’s (NASDAQ:CME) FedWatch tool.

Other data due this week which could help shape expectations from the Fed include the second estimate of gross domestic product, jobless claims and manufacturing activity.

U.S. consumer confidence retreated in February after a three-month gain, and orders for long-lasting U.S. manufactured goods fell more than expected in January, data showed on Tuesday.

Viking Therapeutics (NASDAQ:VKTX) surged 112.85% after its experimental drug to treat obesity helped patients achieve “significant” weight loss in a mid-stage study.

In turn, Amgen (NASDAQ:AMGN), which is also developing a weight-loss drug, dropped 2.3%, the biggest drag on the Dow.

Norwegian Cruise Line (NYSE:NCLH) Holdings jumped 18.93% as it forecast first-quarter profit above Wall Street estimates.

Advancing issues outnumbered decliners by a 1.4-to-1 ratio on the NYSE and by a 1.7-to-1 ratio on the Nasdaq.

The S&P index recorded 41 new 52-week highs and no new lows, while the Nasdaq recorded 223 new highs and 60 new lows.