US stocks mixed as investors await inflation data and earnings

US stocks were mixed on Tuesday as investors appeared to stay on the sidelines ahead of Wednesday’s inflation data which is expected to play a crucial role in determining the Federal Reserve’s next policy decision.

The blue-chip S&P 500 was up 0.3 per cent, with every sector in positive territory except tech, down 0.6 per cent. The tech-heavy Nasdaq was 0.1 per cent lower. Both indices had ended broadly flat on Monday.

The Bureau of Labor Statistics on Wednesday will release its latest US consumer price index report, which is expected to show that headline inflation slowed to 5.1 per cent in March, according to a Bloomberg survey of economists, its lowest level since May 2021. The CPI data should be an important piece of the Fed’s calculus when it meets early next month and debates whether to pause its historic tightening cycle.

Within the data, core services will be closely watched — a category that includes shelter data, which has continued to push overall inflation higher.

“The CPI numbers will be critical for whether the Fed raises rates — not the headline or core figure — but core services, as that has been sticky and a major driver of inflation because of the tight labour market,” said Ryan Sweet, chief US economist at Oxford Economics.

The inflation data comes after US jobs figures released on Friday, which were roughly in line with expectations. The number of jobs added to the economy fell in March to 236,000, but investors said the decline was probably not significant enough to deter the Fed from raising rates again. Markets are now pricing in more than a 70 per cent probability that both the Fed and European Central Bank will raise rates by 0.25 percentage points at their next meetings.

“There’s a push and pull between the acute phase of the recent banking panic fading in the rear-view mirror, which is helping to support risky assets,” said Neil Shearing, group chief economist at Capital Economics. “On the other hand, markets are weighing up the strength of the US payroll data and chances of another rate hike.”

Investors are also eyeing the upcoming bank earnings reports, after the collapse of Silicon Valley Bank triggered turmoil in the sector. JPMorgan, Citi and Wells Fargo report earnings on Friday, followed by Bank of America on April 18. They are expected to reveal that customers withdrew tens of billions of dollars in deposits at the start of 2023, even as they gained new customers following the collapse of SVB.

Across the Atlantic, the Stoxx 600 closed up 0.6 per cent, Germany’s Dax rose 0.4 per cent and London’s FTSE 100 climbed 0.6 per cent. France’s Cac 40 rose 0.9 per cent, reaching an all-time high during the session. Markets had been closed since Friday for the Easter holiday.

Yields on two-year Treasuries rose 0.04 percentage points to 4.05 per cent while 10-year yields were up 0.02 per cent to 3.44 per cent. Bond yields move inversely to prices.

Ten-year German Bund yields were 0.13 percentage points higher at 2.3 per cent, while two-year contracts rose 0.14 percentage points to 2.68 per cent.

The dollar index, which measures the greenback against a basket of six other currencies, fell 0.4 per cent. The euro and sterling rose 0.4 and 0.3 per cent respectively against the dollar.