The S&P 500 ended Monday’s session near the flat line as traders prepared for the release of key inflation data.
The broad-market index ended the day down 0.08% to close at 4,411.55. The Nasdaq Composite closed 0.22% lower to end at 13,767.74. The Dow Jones Industrial Average advanced 0.16%, adding 54.77 points and closing at 34,337.87.
Investors were looking ahead to October’s reading of the consumer price index, due Tuesday, as the next catalyst for markets. Headline inflation is expected to have grown 3.3% from 12 months earlier, according to economists polled by Dow Jones. The metric is also forecasted to have advanced 0.1% from the prior month.
Moody’s on Friday underscored the U.S.′ “very large” fiscal deficits and partisan gridlock in Washington as contributing factors for the cut. The ratings agency reaffirmed America’s credit rating at AAA, the highest level. This comes three months after Fitch lowered the U.S. long-term foreign currency issuer default rating to AA+ from AAA, also citing expected fiscal deterioration, an increasing debt burden and political standoffs on fiscal issues.
Treasury yields were flat Monday despite the negative outlook. The 10-year Treasury note last yielded 4.638%, up about 1 basis point.
“We’re seeing investor reaction to the Moody’s downgrade, but we’re also seeing skittishness around some big developments pending this week. We think all eyes are focused on this week’s inflation data and the resulting Fed policy,” said Greg Bassuk, CEO of AXS Investments.
With that in mind, Bassuk expects market volatility to continue through the end of the year, especially given the ongoing wars overseas. That, combined with mixed economic data, “have resulted in the Grinch fueling the Christmas rally this year.”
