Wall Street Mixed As Investors Await US CPI Figures; Nasdaq 100 Loses 0.4%, Dow Gains 0.1%

Key Points

• Wall Street was mixed on Monday, with the major indices pulling back from multi-month highs printed early in the day.
• The S&P 500 fell 0.1%, the Nasdaq 100 dropped 0.4% while the Dow rose 0.1%.
• Investors were upbeat following last week’s strong US data, but cautious ahead of this week’s US CPI release.

Wall Street Mixed as Investors Turn Focus to Upcoming CPI Report

Wall Street was mixed on Monday, with stocks for the most part pulling back from fresh multi-month highs printed in the early part of the session. The S&P 500 at one point pushed as high as the 4,180s to surpass its early June highs in the 4,170s, before pulling back to below 4,150. The Nasdaq 100 nearly hit 13,400 before pulling back to close closer to 13,150, while the Dow Jones Industrial Average still managed to close about 0.1% higher just above 32,800, after briefly surpassing the 33,000 level for the first time since 8 June.

Investors were in a relatively upbeat mood on Monday as they focused more on the positive signals that last week’s strong US ISM PMI survey and jobs data sent about the US economy, as opposed to focussing on concerns about a faster pace of Fed tightening in order to contain inflation in a US economy that is seemingly still running quite hot.

Fed policymaker Michelle Bowman said over the weekend that the Fed should continue to consider 75 bps rate hikes at upcoming meetings. Other Fed policymakers have recently doubled down on the fact that the bank is determined to tackle multi-decade high inflation, which has been seen by analysts as pushback against markets that in late July had moved to scale back Fed tightening bets in 2023.

The market’s optimistic take on things will be put to the test on Wednesday when US Consumer Price Index is released. The data is expected to show moderation in both the MoM and YoY headline rates of inflation to 0.2% and 8.7% respectively, though the YoY rate of core inflation is seen picking up to 6.1%. Markets are pricing a close to 70% chance that the Fed hikes interest rates by 75 bps in September and investors will be closely scrutinizing how the CPI data influences this pricing.

University of Michigan Consumer Sentiment survey data on Friday will also be closely scrutinized, especially the inflation expectations sub-component, given that inflation remains a key market theme. Further declines in consumer inflation expectations could ease concerns at the Fed about elevated inflation becoming embedded.

Chipmakers Weighed by Nvidia’s Revenue Warning, Energy Sector Outperforms Amid Oil Recovery

Chipmaking stocks suffered after a revenue warning from Nvidia, which warned investors that it expects its second-quarter revenue to drop by by 19% versus Q1 amid weakness in gaming. The widely followed Philadelphia Semiconductor Index ended the US session 1.6% lower but managed to hold above the 3,000 level.

Healthcare names were mixed but in focus, after the US Senate passed the Inflation Reduction act in a 51 to 50 vote, part of which is aimed at lowering drug prices. The bill also creates a new $4,000 tax credit to encourage the purchase of used electric vehicles and includes further subsidies for their production, thus supporting upside in carmakers such as Tesla and Ford.

Tesla shares got a separate boost from a CNBC report that the largest electric carmaker in the world had signed contracts worth around $5 billion with Indonesian nickel processors. Nickel is a key battery component. Tesla shares subsequently gave most of these gains back amid the mixed tone to trade.

In terms of the S&P 500 GICS sectors, Information Technology lost 0.9% and was subsequently the worst performer. Energy, meanwhile, was the best performer, gaining around 0.5% amid a $2.0 rise in WTI prices back above the $90 level from multi-month lows hit last Friday in the $87.00 area.