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US STOCKS-Dow, S&P 500 retreat as yields move higher ahead of data, earnings

Credit: REUTERS/BRENDAN MCDERMID

By Chuck Mikolajczak

NEW YORK, Jan 9 (Reuters) - The S&P 500 and Dow lost ground and closed lower on Tuesday, pressured by a modest rise in Treasury yields as investors assess the timing and size of any Federal Reserve interest rate cuts in 2024 ahead of inflation data this week.

Expectations the central bank could begin cutting rates as soon as March have been slowly decreasing, with CME's FedWatch Tool showing a 65.7% chance for a cut of at least 25 basis points (bps) for the month, down from 79% a week ago.

That has helped keep U.S. Treasury yields hovering near the 4% mark, with the benchmark 10-year yield US10YT=RR last up slightly at 4.01% after reaching a high of 4.053% earlier in the session.

Investors are bracing this week for more Treasury supply and inflation data through the consumer price index (CPI) and producer price index (PPI). Earnings season unofficially begins on Friday, with reports from banks such as JPMorgan JPM.N.

"It's all speculation on what the Fed may or may not do and the bond market clearly got ahead of itself in anticipating rate cuts starting in March," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

"The fed futures will move around based on earnings definitely and on the data. ... The market is just jumping one way or the other trying to get ahead of things if they occur."

According to preliminary data, the S&P 500 .SPX lost 7.09 points, or 0.15%, to end at 4,756.45 points, while the Nasdaq Composite .IXIC gained 13.94 points, or 0.09%, to 14,857.71. The Dow Jones Industrial Average .DJI fell 157.91 points, or 0.43%, to 37,525.10.

The majority of the 11 major S&P sectors fell, with energy .SPNY the weakest with a decline of about 1.5% while tech .SPLRCT led gainers with a rise of only about 0.1%.

Stocks had rallied on Monday, with the Nasdaq and S&P 500 scoring their first daily percentage climbs of more than 1% since Dec. 21 and biggest one-day percentage advances since Nov. 14.

Investors will parse Fed Vice Chair for Supervision Michael Barr's remarks for his perspectives on the policy outlook later on Tuesday.

Boeing BA.Nweakened for a second straight session as the plane maker, main U.S. air regulator and U.S. airlines were still wrangling over 737 MAX 9 inspection guidelines that would address safety lapses after airlines found several aircraft with loose parts. The parts were found on grounded 737 MAX 9s in the wake of last week's emergency landing of an Alaska Airlines flight after a panel blew off.

Juniper Networks JNPR.N surged after a source told Reuters that Hewlett Packard Enterprise HPE.Nwas in talks to buy the networking product maker in a $13-billion deal. The server maker dropped 7.3%.

(Reporting by Chuck Mikolajczak; Editing by Richard Chang)

((charles.mikolajczak@tr.com; @ChuckMik;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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