Boeing Drags Down Dow Futures as Investors Worry About Fed Trajectory

Stocks experienced a predominantly positive trend on Monday, driven by tech gains that lifted the S&P 500 and Nasdaq, while the Dow Jones Industrial Average faced downward pressure due to a decline in Boeing shares. The dynamics of the major indices were as follows:

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• Dow Jones Industrial Average (DJIA): Declined by 75 points, or 0.2%, closing at 37,391.
• S&P 500 (SPX): Increased by 26 points, or 0.6%, reaching 4,723.
• Nasdaq Composite (COMP): Gained 174 points, or 1.2%, trading at 14,698.

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This shift followed the cessation of a nine-week winning streak for the Dow, S&P 500, and Nasdaq Composite on Friday.

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The Dow faced downward pressure primarily due to a 6.8% decline in Boeing shares (BA). This drop followed the grounding of some of its 737 Max 9 planes after a fuselage panel blowout.

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Despite the Dow's decline, the S&P 500 and Nasdaq experienced upward movements as Treasury yields retreated. The 10-year note rate dropped below 4% following a New York Fed survey revealing that U.S. one-year inflation expectations were at their lowest since January 2021.

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Sectors sensitive to interest rates, particularly the technology sector, witnessed a 1.7% increase.

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Market uncertainty persists concerning the Federal Reserve's policy trajectory, fueled by conflicting data. While Friday's robust U.S. labor market report contrasted with a weaker-than-expected services sector survey, upcoming inflation data, including Thursday's consumer-price index and Friday's producer-price index, is anticipated to provide clarity.

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Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley, emphasized the significance of this week's inflation data in determining whether the previous week's market pullback was a momentary blip or indicative of a more significant trend.

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Dallas Fed President Lorie Logan cautioned against ruling out rate increases prematurely, citing inflation remaining above the 2% target. She expressed concern that an early easing of financial conditions could lead to a resurgence in demand.

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Raphael Bostic, president of the Atlanta Fed, is expected to provide further comments, contributing to the ongoing narrative about the Fed's stance. Thursday's release of the December consumer prices index will also be closely monitored, with economists projecting headline annual inflation to be 3.3%, slightly higher than November's 3.1%.

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The central bank's officials have been conveying a message of caution, discouraging excessive optimism in the market regarding swift reductions in borrowing costs this year.

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Additionally, investor attention will shift to the corporate earnings season, commencing on Friday with big banks such as JPMorgan, Citigroup, and Wells Fargo leading the charge. According to FactSet, aggregate earnings for the S&P 500 are expected to rise by 1.3% during the fourth quarter of 2023.