NEW YORK (AP) — U.S. stocks fell on Monday as Wall Street prepared for a report on inflation that could show how realistic hopes for interest rate easing are.
The S&P 500 index fell 0.5% in morning trading, snapping off its third losing week in 19 years. But it remains close to Thursday's all-time high, buoyed by expectations and signals that interest rates will be cut this year. The economy remains remarkably resilient.
As of 10:30 a.m. ET, the Dow Jones Industrial Average was down 212 points, or 0.5%, and the Nasdaq Composite Index was down 0.4%.
If economists' predictions are correct, Tuesday's report on consumer-level prices could show that inflation remained at 3.1% in February.
A month ago, a hotter-than-expected report on consumer-level inflation sent financial markets into turmoil as they scrambled to see when the Federal Reserve would start cutting interest rates. Expectations of such rate cuts have already pushed stock prices higher in the bond market, and U.S. Treasury yields have also fallen.
But inflation has been trending mostly downward, cooling from peaks above 9% toward the Fed's 2% target. Federal Reserve Chairman Jerome Powell said last week that the Fed is “not far off” from gaining enough confidence in inflation to start cutting rates. Lowering the Fed's key interest rate from its highest level since 2001 would ease pressure on the economy and financial system, while lowering investment prices.
Traders are widely expecting the Fed to start cutting interest rates in June.
Those expectations are behind some of the biggest gains in U.S. stock markets since late October, Morgan Stanley's Michael Wilson and other strategists say. But from here on, for the rally to continue, “the burden will likely be on showing further significant improvement in earnings and fundamentals.”
Gold prices also rose to record levels, partly due to expectations for interest rate easing. When bonds pay less interest, investors lose out on less income by owning gold instead. Gold rose 0.1% on Monday to $2,187 an ounce.
Bitcoin, which proponents sometimes tout as “digital gold,” also broke records. It rose from below $17,000 at the beginning of last year to more than $72,000. This has more than recovered from its previous peak of nearly $69,000.
A number of new exchange-traded funds that make investing in Bitcoin easier are also helping to increase interest in the cryptocurrency. Coinbase, which provides custodian services for these ETFs, rose 3.3%.
The loser was Nvidia, which fell 0.4%. The stock continues an unusual losing streak after falling 5.5% on Friday, its worst day since May. Nvidia is up more than 70% this year after more than tripling last year amid Wall Street's frenzy over artificial intelligence technology.
This rally has catapulted Nvidia's size to become the third-largest stock on Wall Street. As a result, the company's stock price trends have a large influence on the S&P 500 Index, and the company has been criticized for rising too quickly.
Natural gas producer EQT falls 8.5%, lower S&P 500 after announcing it will acquire Equitrans Midstream and its gas transmission and storage systems in an all-stock deal that values the combined company at $35 billion. rate was the highest. Equitrans Midstream rose 1.9%.
Elsewhere on Wall Street, Reddit said it is seeking to raise up to nearly $750 million by selling shares to investors on an exchange for the first time. The social media company expects its stock to trade under the ticker symbol “RDDT.”
In the bond market, yields remained relatively stable. The yield on the 10-year U.S. Treasury rose slightly to 4.09% from 4.08% late Friday.
In overseas stock markets, indexes fell in most regions of Europe and Asia.
Japan's Nikkei Stock Average fell 2.2%. The country's government said the country's economy may have actually grown slightly in the last three months of 2023, which was better than the previously announced contraction. That means the country's economy is not in recession.
The Nikkei Stock Average has continued to set records recently after surpassing its highest since 1989, partially boosted by ultra-easy interest rates and other policies aimed at supporting Japan's economy.
Chinese stocks rose, with the index up 0.7% in Shanghai and 1.4% in Hong Kong. China's National People's Congress concluded with near-unanimous support for the ruling Communist Party's top leaders.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
Stan Cho, Associated Press
