Dow rises as yields fall, while tech buoys S&P 500, Nasdaq

What’s driving markets

The Dow turned higher Monday afternoon, after being under pressure earlier, as shares in Boeing
BA,
-6.47%
fell 6.5% after some of its 737 Max 9 planes were grounded following the blowout of a fuselage panel.

Treasury yields pulled back on Monday, with the rate on the 10-year note
BX:TMUBMUSD10Y
sliding back below 4% after a New York Fed survey found U.S. one-year inflation expectations were at their lowest since January 2021.

Read: NY Fed: It’s been years since consumers felt this good about where inflation could go next

Investors will be closely watching stocks’ close on Monday, as the S&P 500’s movement over the first five trading days of the year often provides a good indicator of how it will perform over the rest of the year, according to historical data.

Historically, the large-cap U.S. equity benchmark has seen its performance in the first five trading days and over the full year correlate in the same direction 69% of the time, based on Dow Jones Market Data going back to 1950. 

Monday is the fifth trading day of 2024, and the S&P 500 is down 0.5% year to date, according to FactSet data.

Friday’s stronger-than-expected reading on the U.S. labor market coupled with a weaker-than-forecast survey of the services sector encapsulated the uncertainty over the trajectory of Fed policy. Inflation data due this week, including the December reading of the consumer-price index on Thursday and the producer-price index on Friday will also be closely watched.

“This week’s inflation data could determine whether last week’s pullback is a blip on the radar or something larger,” Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley, said in an email.

“The S&P 500 started the year with three straight down days for just the ninth time since 1991, and jobs data showed the labor market is still percolating,” he said.

Need to Know: Wall Street’s most celebrated bear is not a bull yet. Here’s Mike Wilson’s stock-market playbook for three economic scenarios.

Speaking on Saturday, Dallas Fed President Lorie Logan said it was too early to take rate increases off the table as inflation remained above the 2% target and “a premature easing of financial conditions could allow demand to pick back up.”

See: Why stock-market investors will remain at mercy of shifting rate-cut expectations after wobbly start to 2024

On Thursday the December consumer prices index will be published, where economists expect headline annual inflation to be 3.3%, up from November’s 3.1%.

Indeed, recent comments from the central bank’s officials suggest they are trying to discourage the market from getting too hopeful that borrowing costs will be swiftly reduced this year.

Monetary policy will have some competition for investors’ attention on Friday when the fourth-quarter 2023 corporate earnings season kicks off, with big banks such as JPMorgan
JPM,
-0.82%,
Citigroup
C,
-1.08%
and Wells Fargo
WFC,
-0.45%
leading the charge. Aggregate earnings for the S&P 500 are expected to rise 1.3%, according to FactSet.

Earnings Watch: This earnings season will be the first big test of the market’s year-end rally. The forecasts don’t look great.

Companies in focus

• Alaska Airlines said that it had canceled 170 flights — more than one-fifth of its schedule — by midafternoon Sunday on the West Coast because of the Boeing 737 groundings. Shares of Alaska Air Group Inc.
  ALK,
  +0.12%
  were off 0.2%, trimming an earlier decline. Shares of fuselage maker Spirit AeroSystems Holdings
  SPR,
  -5.64%
  were down more than 5%, but also off the session low.

• Harpoon Therapeutics’ stock
  HARP,
  +112.27%
  rose 112% to $22.41 after Merck & Co.
  MRK,
  -0.28%
  said it would buy the cancer-treatement developer, paying $23 in cash for each Harpoon share, representing a hefty premium over Harpoon’s $10.55 closing price on Friday.

— Jamie Chisholm contributed.