U.S. stocks ended lower on Monday as investors braced for a busy week of economic data and looked for more catalysts to take the market higher following a boost from Nvidia last week.

How stocks traded

  • The Dow Jones Industrial Average
    dropped 62.30 points, or 0.2%, to close at 39,069.23, according to Dow Jones Market Data.

  • The S&P 500
    declined 19.27 points, or 0.4%, to end at 5,069.53.

  • The Nasdaq Composite
    fell 20.57 points, or 0.1%, to finish at 15,976.25.

The Dow last week rose 1.3%, notching its 14th record close of 2024 on Friday, while the S&P 500 posted a weekly advance of 1.7% and its 13th record finish of the year. The Nasdaq Composite rose 1.4% for the week, after briefly trading above its record close from Nov. 19, 2021, on both Thursday and Friday.

What happended

The Dow fell on Monday as the 2-year Treasury yield ended at its highest level in three months, and as investors look past the earnings results from Big Tech companies, José Torres, senior economist at Interactive Brokers, said in a call.

Stocks rallied last week, with Nvidia Corp.

surging in the wake of its stronger-than-expected quarterly results.

“We are encouraged by the stock-market rally so far this year, which is being driven in large part by better-than-expected earnings and excitement over artificial intelligence, which is helping to overshadow the market’s fears that the [Federal Reserve’s] rate cuts may be delayed due to persistent inflation,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in Punta Gorda, Fla., which has $1 billion in assets under management.

Landsberg said he expects 2024 to be “the year of ‘show me the money’” when it comes to AI.

“Companies that can produce earnings from AI will see their stocks continue higher, and the companies that are unable to produce earnings from AI will give back much of their 2023 gain,” he said. “Much of the AI hype will prove to be overblown for most companies, but for the true winners, the hype will look conservative.”

The week will bring several important data points, including the first revision to fourth-quarter gross domestic product on Wednesday and the Federal Reserve’s favored inflation metric, the core reading of the personal-consumption expenditures index, on Thursday.

See: Should stock-market investors care more about Nvidia or the Fed? Inflation data will provide a test.

“Our economists believe the MoM (month-on-month) core print will be at 0.36% vs. 0.17% last time,” said a team of strategists at Deutsche Bank led by Jim Reid. “This would make it the highest since last January. The fact that last January was 0.51% means that rolling out base effects should help the [year-over-year] rate edge down a tenth to 2.8%. However it’s the monthly print that will be all important,” the strategists said.

If the PCE data surprises to the cooler side, investors may see a recalibration of the Fed’s rate-cut expectations, according to Quincy Krosby, chief global strategist at LPL Financial. Traders may start pricing in a potential rate cut in May again in that case, Krosby said in a call.

However, if the reading comes in hotter than expected, it may confirm that the “last mile” for the Fed to bring inflation down to its 2% goal is particularly challenging, she said.

Monday’s new-home sales data showed sales ticked up in January. Appearances by several Fed speakers will be sprinkled throughout the week as well.

Companies in focus

Read: Buffett praises ‘architect’ Munger but doesn’t reveal new investment in Berkshire’s 2024 shareholder letter

Barbara Kollmeyer contributed.

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