S&P 500 near flat as investors weigh chances of less aggressive rate hikes

NEW YORK, Jan 9 (Reuters) – The S&P 500 ( .SPX ) erased early gains to close nearly flat on Monday as expectations that the Federal Reserve will be less aggressive with its rate hikes were offset by lingering inflation concerns.

The Dow finished lower, and the Nasdaq Composite (.IXIC) finished well off the day’s highs.

Investors are awaiting comments on Tuesday from Fed Chairman Jerome Powell, who some strategists expect may say more time is needed to show that inflation is under control.

Money market bets showed 77% odds for a 25 basis point hike in the Fed’s February policy meeting.

A consumer price report due on Thursday could be key to interest rate expectations, said Quincy Krosby, chief strategist, LPL Financial in Charlotte, North Carolina. “The CPI report this week is going to be crucial in fine-tuning the Fed Funds futures market.”

Investors may also have sold some stocks after the recent strong market gains, said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago. “You’re seeing some profit-taking ahead of the CPI number coming out this week.”

The technology sector (.SPLRCT) rallied as Treasury yields fell. Consumer staples ( .SPLRCD ) also rose, with Amazon.com Inc ( AMZN.O ) up 1.5% after Jefferies said cost pressures eased for the e-commerce giant in the second half of the year.

Also, S&P 500 companies are about to kick off the fourth quarter earnings period, with results from top US banks expected later this week.

The Dow Jones Industrial Average (.DJI) fell 112.96 points, or 0.34%, to 33,517.65, the S&P 500 (.SPX) lost 2.99 points, or 0.08%, to 3,892.09 and Nasdaq Composite (.IXIC)6 points, 6.IXIC. 0.63% to 10,635.65.

Shares in Broadcom Inc ( AVGO.O ) fell in late trading, ending down 2% after Bloomberg, citing people familiar with the matter, reported that Apple Inc ( AAPL.O ) plans to ditch a Broadcom chip in 2025 and use an in – house design instead.

Friday’s jobs report, which showed a moderation in wage increases, raised hopes that the Fed may become less aggressive in its pressure to raise interest rates to reduce inflation.

Tesla Inc ( TSLA.O ) shares rose 5.9% after the electric car maker indicated longer wait times for some versions of the Model Y in China, signaling that the recent price cuts could stimulate demand.

Macy’s Inc ( MN ) fell 7.7% and Lululemon Athletica Inc ( LULU.O ) fell 9.3% after both retailers posted disappointing holiday quarter forecasts.

Volume on US exchanges was 11.35 billion shares, compared to the 10.90 billion average for the full session over the past 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a ratio of 1.85 to 1; on the Nasdaq, a ratio of 1.48 to 1 favored advances.

S&P 500 posted 13 new 52-week highs and two new lows; The Nasdaq Composite registered 129 new highs and 32 new lows.

Additional reporting by Shubham Batra, Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta and Richard Chang

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