US stocks dipped slightly on Monday as traders took into consideration potential monetary decisions over key inflation data due out this week. The S&P 500 fell, while the Nasdaq 10 closed below the opening prices. Treasury yields also pulled back from session highs.
Anticipation has pressed on the market because more than five rate hikes are projected this year. That is because the US labor market improved more than expected, and the upcoming inflation report on Thursday could lead to more market volatility.
"The market is in transition," said Chuck Cumello, president and CEO of Essex Financial Services. "You're going from an accommodative Fed to one that's going to tighten, you're going from a scenario last year where the federal government was literally putting money in people's pockets to spend and that's not happening, and you have these big geopolitical events. It's a very challenging environment for high P/E stocks," he added.
Stocks were rallying last week, but trading was volatile because of weak earnings reports from tech giants, positive earnings from Amazon and hawkish Fed statements.
Sarah Hunt, portfolio manager at Alpine Woods Capital Investors, said: "We all know that global central banks are poised to have an inflection in interest rate policy; what we don't know is how far each of them are going to go and how quickly they're going to try to get there. It's this unknowing about how fast and far the Fed is going to go right now that I think is part of why you're getting these big zig zags of up and down."
Other events to watch out for this week are:
- earnings reports of AstraZeneca, Commonwealth Bank of Australia, GlaxoSmithKline, Pfizer, SoftBank Group, Toyota Motor, Twitter, Uber and Walt Disney;
- speech of Cleveland Fed President Loretta Mester (Wednesday);
- speech of Bank of England Governor Andrew Bailey (Thursday);
- data on US CPI, and jobless claims (Thursday).