The Nasdaq slipped on Monday afternoon after briefly surpassing its record closing high from November 2021, while the Dow rose modestly ahead of two U.S. inflation reports this week that could influence Federal Reserve policy.
The benchmark S&P 500 closed slightly lower but remained just above the 5,000-point level it crossed on Friday.
Traders awaited January's Consumer Price Index (CPI) and Producer Price Index (PPI) this week to gauge prospects for interest rate cuts. This week the market also gets data on industrial production, retail sales and preliminary University of Michigan consumer sentiment.
"The CPI report tomorrow will be just another important data point on where inflation is and that will translate to the pace of when we may see a cut in the Fed funds rate," said Michael Rosen, chief investment officer at Angeles Investments. "No one wants to make a big bet one way or the other."
The Nasdaq lost steam in the afternoon after rising early in the session past its highest closing level hit in November 2021, within a percentage point of its all-time intra-day high of 16,212.229.
"An inflation number that's really hot might get some investors a bit nervous, but other than that the Fed is going to be in the same mode," said Joe Saluzzi, co-manager of trading at Themis Trading.
Over the past four months, megacaps with greater exposure to artificial intelligence have spearheaded a bull market on Wall Street as other stocks also rose on hopes of imminent rate cuts and an upbeat outlook from businesses.
During the session, Nvidia crossed above Amazon.com in market capitalization, as the euphoria around AI catapulted the chipmaker to the fourth-most valuable U.S. company, but ended the day behind the online retailer. Nvidia ended the day up 0.16%, while Amazon dipped 1.2%.
With recent data reflecting a robust economy, central bankers have shown less eagerness for early rate cuts. The odds for at least a 25-basis-point rate reduction in May have dropped to 52.2%, from over 95% at the start of 2024, as per the CME FedWatch Tool.
The S&P 500 lost 4.12 points, or 0.08%, to end at 5,022.49 points, while the Nasdaq Composite lost 42.74 points, or 0.27%, to 15,947.92. The Dow Jones Industrial Average rose 135.76 points, or 0.35%, to 38,807.45.
The small caps Russell 2000 index climbed 1.9%.
"Investors are rotating into those areas that have not kept pace with the broader market because that's possibly where there is greater value," said Sam Stovall, chief investment strategist at CFRA Research. "Today could be sort of a bottom fishing day for the market."
Among other movers, Diamondback Energy jumped 9.4%, helping energy to top the 11 S&P 500 sectors with gains. Diamondback announced a $26-billion deal to buy the largest privately held oil and gas producer in the Permian basin, Endeavor Energy Partners.
Joby Aviation gained 6.4% as the electric-powered aircraft maker signed an agreement to launch air taxi services in the United Arab Emirates by early 2026.
On the Nasdaq 2,835 issues advanced and 1,452 declined as a 1.95-to-1 ratio favored advancers. On the NYSE advancing issues outnumbered declining ones by a 3.4-to-1 ratio. There were 592 new highs and 46 new lows.
The S&P 500 posted 53 new 52-week highs and no new lows while the Nasdaq recorded 344 new highs and 53 new lows.
On U.S. exchanges 11.14 billion shares changed hands compared with the 11.72 billion moving average for the last 20 sessions. (Reporting by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Maju Samuel and David Gregorio)