S&P 500 dips as inflation data supports rate worries

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(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window.)


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Marriott rises on upbeat profit outlook


Palantir surges on forecasting profitable year


Apple, Alphabet weigh on S&P 500


Indexes: S&P 500 -0.20%, Nasdaq +0.07%, Dow -0.44%

(Updates with afternoon trading, adds investor comment)

By Johann M Cherian and Noel Randewich

Feb 14 (Reuters) –

The S&P 500 dipped on Tuesday after U.S. consumer price data for January offered little to change expectations about the Federal Reserve’s path forward on interest rate hikes.

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Data showed U.S. consumer prices accelerated in January as Americans continued to be burdened by higher rental housing costs, suggesting that the Fed Federal Reserve will maintain a moderate interest rate hiking path.

“Inflation remains elevated, albeit it appears to be slowing,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis. “Looking at today’s price action, I think it might be a little bit of profit-taking on the heels of strong year-to-date performance.”

Losses of about 1% in Apple Inc, Amazon.com Inc and Alphabet Inc helped keep the S&P 500 in negative territory.

Of the 11 S&P 500 sector indexes, seven declined, led by real estate, down 1.12%, followed by a 0.64% loss in consumer staples.

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The consumer discretionary index rose 0.5% on a 4.4% gain in Tesla Inc. The electric car maker has rebounded 65% in 2023 after losing two-thirds of its value last year.

Money market traders are betting on at least two more 25 basis point rate hikes this year, with interest rates seen peaking at 5.28% by July.

Also adding to the investor angst were hawkish remarks by Richmond Fed President Thomas Barkin and Dallas Fed President Lorie Logan. Barkin said the Fed needs to prioritize quashing inflation over risks to U.S. economic growth.

Wall Street had an upbeat start to the year, lifted by renewed interest in volatile growth stocks battered in 2022 as the Fed raised rates aggressively to bring steep prices under control.

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The rally, however, stalled last week following signs of a tight labor market and hawkish commentary from Fed policymakers.

The S&P 500 is up about 8% so far in 2023, while the Nasdaq Composite Index has rebounded about 14%.

Investors will closely watch January retail sales data on Wednesday for hints on consumer spending amid worries of an economic slowdown.

In afternoon trading, the S&P 500 was down 0.20% at 4,129.11 points.

The Nasdaq gained 0.07% at 11,900.01 points, while the Dow Jones Industrial Average was down 0.44% at 34,094.88 points.

Shares of Boeing Co rose 1.8% to their highest in over a year after Air India unveiled a deal to buy 220 of its passenger planes.

Coca-Cola Co slipped 1.4% despite a strong full-year profit forecast.

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Marriott International Inc rose 2.8% after the hotel operator forecast first-quarter earnings above Wall Street estimates as it benefited from strong travel demand.

Palantir Technologies soared more than 15% after the data analytics firm forecast its first profitable year.

Of the more than half of S&P 500 firms that have reported results, nearly 69% have beaten profit expectations, as per Refinitiv on Friday. However, analysts expect fourth-quarter earnings to fall 2.8% from a year earlier.

Across the U.S. stock market, declining stocks outnumbered rising ones by a 1.3-to-one ratio.

The S&P 500 posted 10 new highs and no new lows; the Nasdaq recorded 60 new highs and 65 new lows. (Reporting by Johann M Cherian and Sruthi Shankar in Bengaluru, and by Noel Randewich in Oakland, California; Additional reporting by Stephen Culp in New York; Editing by Sriraj Kalluvila, Maju Samuel and Richard Chang)


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