U.S. stocks on Tuesday were mixed, though they were near session highs, as investors stayed non-committal ahead of key inflation data due later this week which could cement expectations for another rate hike by the Federal Reserve.
By afternoon, the Nasdaq Composite (COMP.IND) had slipped 0.27% to 12,051.59 points, weighed down by technology stocks which were led by losses in Amazon (AMZN) and Microsoft (MSFT). The more concentrated Nasdaq 100 index was on track for its fifth negative session in six.
Of the 11 S&P sectors, nine were trading in the green, led by Energy and Materials. Technology and Communication Services were the three losers.
Markets ended mixed on Monday as traders reacted to Good Friday’s jobs data. Nonfarm payrolls rose slightly less-than-expected, but the data overall continued to indicate a tight labor market and led to market participants bolstering their expectations for a 25 basis point hike by the Fed’s monetary policy committee at its meeting in May.
“With another strong jobs report in hand, investors have responded by dialling up the probability of another Fed rate hike at the next meeting,” Deutsche Bank’s Jim Reid said.
“That’s now only three weeks from tomorrow, and since the jobs report, the odds of another 25bp hike have risen from a near-even 53% to a stronger 71% this morning. In addition, futures further out the curve are pricing in their most hawkish rate path for the Fed since the SVB collapse, with the year-end rate priced at 4.40% by yesterday’s close. That’s the highest it’s been in a month, even if it’s still over a full point beneath its pre-SVB level of 5.56%,” Reid added.
The closely-watched consumer price index report for March is due on Wednesday. Economists expect a rise of 0.3% from February, while core CPI is expected to gain 0.4% sequentially. The data will probably give the final impetus to market expectations around the Fed’s monetary policy direction.
According to the CME FedWatch tool, the chances of a 25 basis point hike in May by the Fed is now at nearly 70%, followed by a pause in the June meeting.
The economic calendar was light on Tuesday, with only NFIB small business optimism data on the docket, which shrank marginally in March.
Also in focus later this week are quarterly reports by big banks. Commentary by executives will be closely watched this time after the recent banking crisis.