Market Snapshot: Dow closes lower after stock-market gains evaporate, investors re-evaluate peak-inflation narrative


U.S. stocks traded mostly higher Monday afternoon, but were off the session’s best levels, as investors evaluated a mixed batch of views from Federal Reserve officials and the question of whether October’s cooler-than-expected inflation data might be the start of easing price pressures.

How stocks are trading

The Dow Jones Industrial Average DJIA was up 108 points, or 0.3%, at 33,852.

The S&P 500

advanced 6 points, or 0.2%, to 3,998.

The Nasdaq Composite fell 3 points, or less than 0.1%, to 11,322, flipping between modest gains and losses.

Stocks rose sharply late last week, with the Nasdaq Composite advancing 9.4% in two days to cement its biggest weekly advance since at least March, while the S&P 500 clinched its best such performance since June.

What’s driving markets

Stocks were mostly higher Monday afternoon, but off their best levels of the session as investors waited to see if last week’s rally, inspired by softer-than-anticipated October inflation data, might still have some more room to run.

Signs of cooling inflation in Thursday’s consumer prices data have bolstered hopes that the Federal Reserve may not need to continue raising borrowing costs at such an aggressive pace. The Fed’s No. 2 official, Lael Brainard, seemed to confirm as much, by telling Bloomberg in an interview that it may be appropriate soon for policy makers to slow down their current pace of rate hikes.

“We have to take a look at what the market has done over the last couple of weeks,” said Edward Moya, senior market analyst for the Americas at OANDA Corp. “Equities have clearly stabilized and it’s all because of expectations that the Fed is about to end its tightening cycle after February.”

“Now we are at a weird stage where investors need to see inflation soften, which means you are not going to see strong positioning until we get the next inflation report,” Moya said via phone. “That’s going to make it a choppy environment for stocks until there’s further clarity if the Fed is done with raising rates or will have to continue. Officials need to see labor-market weakness and we are finally getting signs of that, too.”

Jim Reid, head of thematic research at Deutsche Bank
and others point out in a note to clients that the inflation report wasn’t the only factor that helped set up stocks and other risk-sensitive assets for a rebound.

“Impressive levels of European gas storage due to the weather, very short positioning in US equities, mid-terms being out the way, positive seasonals, less event risk in the Russian/Ukraine war, and now softer U.S. inflation than expected are all helping,” Reid said.

Also helping the rebound was a rally in some of the worst-hit technology stocks as investors welcomed signs that they may be reining in their profligate spending. Meta Platforms
for example, was up 2.5% as it cuts its staff count.

Looking ahead, technical strategists see the next key resistance level for the S&P 500 at 4,100.

“The market gapped up cleanly and ferociously through that 3900 level. Now its next test is looming: the 200-day moving average and that downtrend line tracing the previous sequence of highs,” said Callum Thomas at ChartStorm.

Source: ChartStorm

“We know the narrative [cooler CPI] that helped it breakout, [it] makes me wonder what story we might tell once its reaches resistance…markets have a habit of finding excuses to do what they are technically ready to do!” Thomas added.

Government bond markets resumed trading on Monday, after being closed Friday for the Veterans Day holiday, with the yield on the 10-year note

up 5 basis points at 3.87%.

Over the weekend, Fed Gov. Christopher Waller said financial markets seem to have overreacted to the softer-than-expected October consumer price inflation data last week, and that “we’ve got a ways to go.”

Since last week’s rally on the October CPI data, TD Securities strategists Jose Gonzalez and Cristian Maggio said, “our indicators show that investors are lightly positioned in risky assets. In our view, this is playing an important role in the current market dynamics.”

See: Stock-market rally despite FTX blowup, Facebook-parent’s layoffs, says investors may be whistling past recession’s graveyard

Single-market movers

Semiconductor stocks are rebounding a bit on Monday. The VanEck Semiconductor ETF

was up 0.6%. Intel Corp.

was up 1.5%.

Moderna Inc. announced both of its new Covid-19 boosters produced a better antibody response against the BA.4 and BA.5 variants in a Phase 2/3 clinical than the company’s original booster. Moderna shares

rose 5.4%.

Chinese tech names were up sharply on more news about Covid-19 restrictions waning. The KraneShares CSI China Internet ETF

was up 2.9%, while shares of Baidu Inc.


were also up, among other Chinese megacap tech names like Alibaba
. Inc. stock

slipped 1% after the New York Times reported that the company intends to lay off about 10,000 corporate and technology workers as economic conditions continue to hit Big Tech.

— Jamie Chisholm contributed to this article.

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