Wall Street capped a choppy day of trading with a mixed finish for stock indexes Monday, as investors brace for another sharp interest rate increase by the Federal Reserve this week as the central bank combats inflation.
The S&P 500 edged up 0.1% after fluctuating between gains and losses. The Dow Jones Industrial Average rose 0.3%, while the tech-heavy Nasdaq Composite fell 0.4%.
Small-company stocks fared better than the broader market, sending the Russell 2000 0.6% higher.
The major indexes are coming off solid gains last week after a mix of mostly better-than-expected reports on corporate profits. Falling yields in the bond market also helped, easing the pressure on stocks after expectations for rate increases by the Fed sent yields soaring much of this year.
On Wednesday, most economists expect the Fed to announce a three-quarter percentage point jump in its short-term rate, a second consecutive hefty increase that it hasn't otherwise implemented since 1994. It would put the Fed's benchmark rate in a range of 2.25% to 2.5%, the highest since 2018.
Wall Street will closely watch a news conference by Fed Chairman Jerome Powell on Wednesday to get a sense of policymakers' next steps.
"The only question is will Powell sound a little less hawkish in his press conference," said Sam Stovall, chief investment strategist at CFRA.
The U.S. economy is slowing, but healthy hiring shows it isn't yet in recession, Treasury Secretary Janet Yellen said Sunday on NBC's "Meet the Press." She spoke ahead of a slew of economic reports scheduled this week that will shed light on an economy currently besieged by rampant inflation.
Since the Fed last met in June, the government has reported that inflation accelerated to a 9.1% annual rate, the most since 1981.
Still, some early signs suggest that inflation may be cooling from red-hot levels. Auto club AAA said on its website as of Monday that the average price of a gallon of regular gas is $4.36. That's down 16 cents from a week ago, and 55 cents cheaper than late June, when the average price was $4.91 per gallon. Crude oil prices have fallen nearly 10% this month alone.
Even so, elevated inflation is increasingly prompting consumers to reprioritize their spending.
Walmart's shares fell nearly 10% in after-hours trading Monday after the retail giant lowered its profit outlook for the second quarter and full year. The company blamed surging inflation on basics like food that are forcing shoppers to cut back on discretionary items, particularly clothing, that carry higher profit margins.
Outside of the Fed meeting, the week's highest-profile report will likely be Thursday, when the Commerce Department releases its first estimate of the economy's output in the April-June quarter. Some economists forecast it may show a contraction for the second quarter in a row. The economy shrank 1.6% in the January-March quarter. Two straight negative readings is informally considered a recession.
On Wall Street, the S&P 500 rose 5.21 points to close at 3,966.84 Monday. The Dow gained 90.75 points to 31,990.04, and the Nasdaq fell 51.45 points to 11,782.67. The Russell 2000 added 10.89 points to 1,817.77.
Energy companies, banks and health care stocks helped lift the market Monday. Exxon Mobil rose 3.3% and Bank of America added 0.9%. UnitedHealth Group gained 1.5%.
A person wearing a protective mask walks in front of an electronic stock board showing Japan's Nikkei 225 and New York Dow indexes at a securities firm Monday, July 25, 2022, in Tokyo. Asian shares opened mostly lower on Monday, after a retreat on Wall Street spurred by disappointing economic data and corporate earnings. (AP Photo/Eugene Hoshiko)
Statues adorn the facade of the New York Stock Exchange Thursday, July 14, 2022, in New York. Stocks are drifting in mixed trading on Wall Street Friday, July 22, following weaker-than-expected readings on the economy and conflicting profit reports from some big companies. (AP Photo/John Minchillo)
Statues adorn the facade of the New York Stock Exchange, July 14, 2022, in New York. Stocks are opening mixed on Wall Street Monday, July 25, 2022. Cruise lines are falling while gold miner Freeport-McMoRan and Texas-based oil explorer Diamondback Energy are leading the gainers at the opening bell. (AP Photo/John Minchillo)
A person wearing a protective mask stands in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Monday, July 25, 2022, in Tokyo. Asian shares opened mostly lower on Monday, after a retreat on Wall Street spurred by disappointing economic data and corporate earnings. (AP Photo/Eugene Hoshiko)
A person wearing a protective mask walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Monday, July 25, 2022, in Tokyo. Asian shares opened mostly lower on Monday, after a retreat on Wall Street spurred by disappointing economic data and corporate earnings. (AP Photo/Eugene Hoshiko)