Wall St fluctuates as investors weigh jobs report, earnings on tap

By Stephen Culp

NEW YORK (Reuters) – The and the Nasdaq moved lower on Monday as investors digested Friday’s employment report and prepared for an eventful week of inflation data and bank earnings.

Megacap momentum stocks hit the tech-heavy Nasdaq hardest, while industrials helped boost the blue-chip Dow into green territory.

All three indexes were well off session lows by mid-afternoon.

Economically sensitive transports, semiconductors, small-caps and industrials were all outperforming, hinting that the economy is sturdy enough to withstand further rate increases from the Federal Reserve.

“Investors are a little nervous,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “There’s the perpetual question of whether the consumer is going to come through, and if earnings going to be robust enough to carry stocks higher or whether we going to head into a recession.”

On Friday, a market holiday, the Labor Department released its March jobs report, which showed robust payrolls growth and a welcome but modest wage inflation cool-down.

While the report signaled the Fed’s restrictive policy is beginning to have its intended economic dampening effect, it raised the odds that the central bank will move forward with another 25 basis point increase to the Fed funds target rate at the conclusion of its May policy meeting.

At last glance, financial markets have priced in a 70% likelihood of that happening, according to CME’s FedWatch tool.

Recent indicators suggest a softening but sturdy 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 believes the Fed is going to do,” Pursche added. “When the Fed repeats time after time what their priorities are and what they’re going to do, they’re going to do it.”

Market observers will pay close attention to the consumer (CPI) and producer (PPI) price indexes, expected on Thursday and Friday, respectively, for a more complete picture regarding the extent to which inflation cooled in March.

On Friday, a trio of big banks – Citigroup Inc (NYSE:), JPMorgan Chase & Co (NYSE:) and Wells Fargo (NYSE:) & Co – unofficially kick off first-quarter earnings season, and investors will be scrutinizing the reports for clues on the sector’s overall health after two U.S. regional banks collapsed in March.

As of Friday, analysts now expect aggregate S&P 500 earnings down 5.2% year-on-year, a stark reversal from the 1.4% annual growth expected at the beginning of the quarter, according to Refinitiv.

At 2:13PM ET, the rose 50.87 points, or 0.15%, to 33,536.16, the S&P 500 lost 4.44 points, or 0.11%, to 4,100.58 and the dropped 31.86 points, or 0.26%, to 12,056.10.

Among the 11 major sectors of the S&P 500, communication services and technology suffered the largest percentage losses.

Shale oil producer Pioneer Natural Resources (NYSE:) Co jumped 6.4% following a report that Exxon Mobil Corp (NYSE:) held preliminary talks with the company about a potential acquisition.

Charles Schwab (NYSE:) Corp gained 4.9% in the wake of the broker’s reported second-highest ever influx of client assets in March.

Chip stocks such as Micron Technology Inc (NASDAQ:) and Western Digital Corp (NASDAQ:) gained 8.5% and 8.0%, respectively, on Samsung Electronics (OTC:) Co Ltd’s plans to cut chip production.

Advancing issues outnumbered declining ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.16-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and no new lows; the Nasdaq Composite recorded 41 new highs and 131 new lows.