Wall Street ends mixed in an uneven start to December

The muted action came as traders eagerly awaited a closely watched monthly labor market report due out on Friday that will show how the labor market is holding up and how that could influence what the Fed does next in the future. its attempt to calm inflation.

The S&P 500 closed down 0.1% after drifting slightly higher and lower for much of the day. The Dow Jones Industrial Average fell 0.6% and the Nasdaq composite edged up 0.1%.

Banks and home goods suppliers were among the biggest drags on the benchmark S&P 500. Bank of America fell 2.9% and Costco 6.6%.

Gains in healthcare companies, communications services stocks and elsewhere in the market helped contain losses. Drugmaker Pfizer rose 1.9% and Netflix climbed 3.7%.

Salesforce fell 8.3% for the biggest decline in the S&P 500 after Bret Taylor announced he would step down as co-CEO of the customer management software developer.

Yields on both short-term and long-term bonds fell. The 10-year Treasury yield, which influences mortgage rates, fell slightly to 3.51% from 3.61% on Wednesday evening. The yield on the two-year note, which tends to track market expectations for future Fed action, fell to 4.24%. 4.33% a day earlier.

In total, the S&P 500 fell 3.54 points to 4,076.57. The Dow Jones lost 194.76 points to 34,395.01. The Nasdaq gained 14.45 points to 11,482.45.

The Russell 2000 Small Company Index also fell, falling 4.90 points, or 0.3%, to close at 1,881.68.

The main indexes are coming off their second consecutive month of gains. Markets rallied on Wednesday after Fed Chairman Jerome Powell indicated that the central bank could slow the pace of its interest rate hikes as early as this month. The Fed has been aggressively raising interest rates to rein in stubbornly high inflation.

A measure of inflation closely watched by the Fed eased in october. Wall Street is watching all inflation updates closely to get a better idea of ​​whether the Fed will moderate its interest rate hikes.

Powell said the central bank may begin to moderate its rate hike pace at its next meeting in mid-December. The Fed, however, has been very clear about its intention to continue raising interest rates. until it is sure that the inflation cools down.

The Fed has raised its benchmark rate six times since March, bringing it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to peak at 5% to 5.25% by mid-2023.

A big concern for Wall Street is whether the Fed can get rates under control without sending the economy into a recession as it dampens growth. Businesses are seeing falling demand for a wide range of goods as inflation squeezes portfolios. Analysts generally expect the United States to plunge into a recession, even if mild and short, at some point in 2023.

“What turns mild recessions into deep economic scars is the accumulation of excess, and we don’t have a bubble this time around,” said Katie Nixon, chief investment officer of Northern Trust Wealth Management.

Inflation will continue to be Wall Street’s main focus, and “on this point things seem to be running out of steam,” she said.

Investors are also getting more data this week on the impact of inflation on the wider economy. Activity in the manufacturing sector contracted in November for the first time since May 2020, according to the Institute for Supply Management. The report also showed that prices are falling.

“All signs point to a deceleration in inflation in everything but wages,” Nixon said. “He’s sort of the last man standing.”