U.S. stock indexes edged lower on Monday as investors awaited Federal Reserve Chair Jerome Powell’s speech for clues on when the central bank would start cutting interest rates.
The latest non-farm payrolls report highlighted the resilience of the U.S. labor market and stoked fears of rates staying higher for longer.
Focus will be on comments from Fed officials this week, including Powell on Tuesday, for clues on any change in the central bank’s dovish rhetoric after data last week showed services activity were strong in January.
“Right now everything is about what interest rates’ expectations are doing, and today they are up a decent amount,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management.
“The Fed had initially pulled rates’ (expectations) down on Wednesday, but then the jobs number came out and it offset everything that the Fed said.”
Money market participants now see the benchmark rate peaking at 5.1% by July, in line with what most policymakers have backed repeatedly.
Yield on the 10-year U.S. Treasury note extended gains to a month’s high.
After being bruised in 2022, U.S. equities have recovered strongly in 2023, led by megacap growth stocks amid short-lived hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.
Analysts expect quarterly earnings of S&P 500 firms declining 2.8% in the fourth quarter, according to Refinitiv.
Meanwhile, Tesla Inc (TSLA.O) bucked the overall trend with a 2.1% gain after a U.S. jury found Chief Executive Elon Musk and his company were not liable for misleading investors through Musk’s tweets in 2018 saying he had “funding secured” to take the electric-vehicle maker private.
At 12:44 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 81.03 points, or 0.24%, at 33,844.98, the S&P 500 (.SPX) was down 25.44 points, or 0.62%, at 4,111.04, and the Nasdaq Composite (.IXIC) was down 91.59 points, or 0.76%, at 11,915.36.
All of the 11 major S&P 500 sector indexes were in the red, with a 1.3% fall in materials (.SPLRCM) leading declines.
U.S.-listed Chinese stocks such as Pinduoduo Inc (PDD.O) and Baidu Inc fell 3.1% and 1.0%, respectively, on geopolitical concerns after a U.S. military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday.
Declining issues outnumbered advancers for a 3.95-to-1 ratio on the NYSE and a 1.91-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and one new low, while the Nasdaq recorded 65 new highs and 17 new lows.