Wall Street ends mixed on inflation data, earnings on losses

NEW YORK, April 10 (Reuters) – U.S. stock indexes rebounded from sharp losses to a mixed close on Monday as investors digested Friday’s jobs report and braced for an eventful week of inflation data and bank earnings.

Megacap momentum stocks (.NYFANG) dragged the tech-heavy Nasdaq (.IXIC) slightly lower, while industrials (.SPLRCI) helped boost the blue-chip Dow into green territory.

The benchmark S&P 500 ended the session nominally higher.

Financially sensitive transports (.DJT), semiconductors (.SOX), small-caps (.RUT) and industrials outperformed the broader market, suggesting the economy is robust enough to withstand further rate hikes by the Federal Reserve.

“It’s a go nowhere day,” said Sam Stovall, investment strategist for CFRA Research in New York.

“Investors are still convincing themselves that the Fed will raise interest rates by 25 basis points in May, which could increase the likelihood of an impending recession. And investor agitation is heightened ahead of (this week’s) CPI and PPI reports.”

The Dow Jones Industrial Average (.DJI) rose 101.23 points, or 0.3%, to 33,586.52, the S&P 500 (.SPX) rose 4.09 points, or 0.10%, to 4,109.11 and The Nasdaq Composite (.3IXIC) fell, .3IXIC. 0.03% to 12,084.36.

Of the 11 major sectors in the S&P 500, six ended the session higher, led by industrials (.SPLRCI). Communications Services (.SPLRCL) and Utilities (.SPLRCI) suffered the biggest percentage losses.

On Friday, a market holiday, the Labor Department released its March jobs report, which showed robust wage growth and a welcome but modest cooling in wage growth.

While the report signaled that the Fed’s restrictive policy is starting to have its intended economic dampening effect, it increased the odds that the central bank will go ahead with another 25 basis point hike to the Fed funds rate target at the conclusion of its policy meeting in May.

At last glance, financial markets have priced in a 72% probability of that happening, according to CME’s FedWatch tool.

Recent indicators suggest a softening but solid economy, one that can withstand hawkish Fed policy as the central bank works to bring inflation closer to its 2% annual target.

“There’s clearly a disconnect between what the Fed is telling us they’re going to do and what the market thinks the Fed is going to do,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “When the Fed reiterates over and over again what their priorities are and what they’re going to do, they’re going to do it.”

Market participants will be closely watching the Consumer Price Indices (CPI) and Producer Price Indices (PPI), expected on Thursday and Friday respectively, to get a more complete picture of the extent to which inflation eased in March.

On Friday, a trio of major banks – Citigroup Inc ( CN ), JPMorgan Chase & Co ( JPM.N ) and Wells Fargo & Co ( WFC.N ) – will unofficially kick off their first-quarter start-up season, and investors will scrutinize reports for clues on the overall health of the sector following the collapse of two US regional banks in March.

As of Friday, analysts expected overall S&P 500 earnings down 5.2% year over year, a sharp reversal from the 1.4% annual growth expected at the start of the quarter, according to Refinitiv.

“Rarely can you hurt yourself by falling out of a basement window,” Stovall added. “Expectations are set so low that the only surprise will be good news.”

Shale oil producer Pioneer Natural Resources Co ( PXD.N ) rose 5.8% after a report that Exxon Mobil Corp ( XOM.N ) was in preliminary talks with the company about a potential acquisition.

Charles Schwab Corp ( SCHW.N ) rose 4.8% in the wake of the broker’s reported second-highest ever inflow of client funds in March.

Chip stocks Micron Technology Inc ( MU.O ) and Western Digital Corp ( WDC.O ) rose 8.0% and 8.2% respectively on Samsung Electronics Co Ltd’s ( 005930.KS ) plans to cut chip production.

Advances outnumbered decliners on the NYSE by a ratio of 1.63 to 1; on the Nasdaq, a ratio of 1.39 to 1 favored advances.

S&P 500 posted 2 new 52-week highs and no new lows; The Nasdaq Composite recorded 50 new highs and 155 new lows.

Volume on US exchanges was 9.09 billion shares, compared to the average of 12.28 billion over the past 20 trading days.

Reporting by Stephen Culp; Additional reporting by Sruthi Shankar and Ankika Biswas in Bengaluru Editing by Deepa Babington

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