By Chuck Mikolajczak
NEW YORK (Reuters) -The Dow and S&P 500 slipped on Monday, the first session after the biggest weekly percentage gains for the indexes this year, as investors gauged the likely path of interest rates from the Federal Reserve ahead of key inflation data due later in this holiday-shortened week.
Last week, the Fed maintained its guidance for three interest-rate cuts this year, and the S&P 500 and Dow had strong gains while the Nasdaq notched its biggest weekly percentage gain since mid-January.
On Monday, Chicago Fed President Austan Goolsbee said he had penciled in three rate cuts for this year, while Fed Governor Lisa Cook said the central bank needs to proceed with caution as it decides when to start cutting interest rates.
“It’s a breather, the market has held really well, so people are waiting, there’s a lot of people waiting for that pullback,” said Joe Saluzzi, partner, co-founder and co-head of equity trading at Themis Trading in Chatham, New Jersey.
“What the Fed did was give the all clear for now, it’s really interesting what they are doing. They’re not cutting anything yet they just keep delaying it and the market is fine with that… but they’re doing a good job right now of saving the bullets for when they need them.”
According to preliminary data, the S&P 500 lost 15.43 points, or 0.29%, to end at 5,219.02 points, while the Nasdaq Composite lost 44.35 points, or 0.27%, to 16,384.47. The Dow Jones Industrial Average fell 164.21 points, or 0.42%, to 39,317.15.
Economic data showed sales of new U.S. single-family homes fell unexpectedly in February after mortgage rates increased during the month. The underlying trend remained strong with a chronic shortage of previously owned houses on the market.
The Nasdaq held close to unchanged in part due to gains in chipmakers Nvidia and Micron Technology, with Micron hitting an intraday record. Semiconductor shares were choppy, showing initial weakness after a report over the weekend said China had introduced guidelines to phase out U.S. microprocessors supplied by Intel and AMD from government personal computers and servers.
The Philadelphia Semiconductor Index ended slightly lower, after alternating between gains and losses during the session. Intel and AMD closed lower.
Expectations for a Fed rate cut in June were again increasing, with markets now pricing in a 71.9% chance for a cut of at least 25 basis points (bps), according to CME’s FedWatch Tool, up from around 54.7% a week ago.
The February reading of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, is due on Friday, when U.S. markets will be shut for the Good Friday holiday.
A strong reading could jolt market expectations about the timing of a rate cut.
Boeing rose after announcing a broad management shakeup and said CEO Dave Calhoun would step down from his position at the end of 2024. But the planemaker finished off session highs.
Walt Disney advanced after Barclays upgraded the stock to “overweight” from “equal weight”.
(Reporting by Chuck Mikolajczak; Editing by David Gregorio)
