Wall Street braces for inflation report

NEW YORK (AP) — US stock indexes held at a near standstill again on Tuesday, as traders made their final moves ahead of some potentially market-moving reports.

The S&P 500 edged up by 7.52 points, or 0.1%, to 5,209.91 after barely budging the day before. The Dow Jones Industrial Average slipped 9.13 points, or less than 0.1%, to 38,883.67, while the Nasdaq composite rose 52.68, or 0.3%, to 16,306.64.

Treasury yields eased in the bond market ahead of today’s highly anticipated update on inflation at the US consumer level. This week will also bring other reports on inflation, while big US companies will begin delivering their reports for how much profit they made during the first three months of the year.

The dominant question hanging over Wall Street is whether inflation will cool enough to convince the Federal Reserve to deliver the cuts to interest rates that traders are craving and have been betting on.

Some doubts have crept in following a series of hotter-than-expected reports on the economy, and traders now expect just two or three cuts to rates this year. Some are even talking about the possibility of zero. That’s down from forecasts at the start of the year for six or seven cuts, according to data from CME Group.

The Fed’s main interest rate has been sitting at its highest level in more than two decades, and the fear is that rates left too high for too long can cause a recession.

If fewer cuts arrive this year, the onus will be on companies to deliver strong growth in profits to justify the nearly 25% leap for the S&P 500 since the end of October. Critics say stock prices look expensive on several measures, and either profits need to rise or interest rates need to fall to make them look more reasonable.

Strategists at Bank of America are looking for today’s inflation update to show a cooldown after ignoring food and energy prices, which can zigzag sharply. Such a result would likely increase traders’ expectations for a cut to rates in June, which the market currently sees as slightly better than a coin flip’s probability.

While a jump in oil prices this year has raised worries about a feedthrough into inflation, oil would likely need to rise “well above levels seen even in the peak Russia-Ukraine commodity price spike for a meaningful impact on core inflation,” the Bank of America strategists said in a BofA Global Research report.

A barrel of benchmark US crude fell $1.20 to settle at $85.23, trimming its gain for the year so far below 20%. Brent crude, the international standard, fell 96 cents to $89.42 per barrel.

On Wall Street, Apple helped nudge the S&P 500 higher by rising 0.7%. It trimmed it loss for the year to a shade below 12%.