NEW YORK – U.S. stock indices remained virtually paralyzed on Monday as trading calmed down after a whirlwind couple of days that left them just shy of their records.
The S&P 500 fell 1.95 points, or less than 0.1%, to 5,202.39. It was coming from a rocky stretch where a 1.2% drop immediately turned into a 1.1% gain.
The Dow Jones Industrial Average tiptoed down 11.24 points, or less than 0.1%, to 38,892.80, while the Nasdaq composite rose 5.44 points, or less than 0.1%, to 16,253.96.
Much of the focus has been on interest rates and when the Federal Reserve will cut them to ease pressure on the economy and financial system. A series of reports showing that inflation and the economy have remained higher than expected have forced Wall Street to delay forecasts for when rate relief might arrive.
Next week there are several flashpoints that could further change expectations. The latest monthly update on the inflation felt by American consumers will arrive on Wednesday. Reports on wholesale inflation and future inflation expectations among U.S. households will be released later in the week.
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Federal Reserve Chair Jerome Powell recently said he still expects interest rate cuts this year, but the central bank needs additional confirmation that inflation is headed toward its 2% target. The Federal Reserve has kept its main interest rate at the highest level since 2001, hoping to slow the economy and prices enough so that investments can control inflation. The risk of keeping rates too high for too long is that it could cause a recession.
Some Federal Reserve officials have raised the possibility that rates could stay high longer if inflation remains persistent. That pushed many Wall Street traders to reduce expectations about how many rate cuts could come this year from three to two. They had already drastically revised their forecasts from earlier this year, when many expected six or more cuts.
Traders now see roughly a slim chance the Federal Reserve will cut interest rates at its June meeting, compared with a greater than 70% chance a month ago, according to CME Group data.
Interest rate cuts not only make it easier for American households and businesses to borrow, they also encourage investors to pay higher prices for stocks and other investments. Stock prices have already risen in part because of such expectations.
In the bond market, Treasury yields rose to add to their year-to-date gains on lower expectations of rate cuts. The 10-year Treasury yield rose to 4.42% from 4.40% on Friday and from less than 3.90% at the beginning of the year.
