By Stephen Culp
NEW YORK (Reuters) - U.S. stock indexes clawed back from steep losses to a mixed close on Monday as investors digested Friday's employment report and prepared for an eventful week of inflation data and bank earnings.
Megacap momentum stocks dragged the tech-heavy Nasdaq slightly lower, while industrials helped boost the blue-chip Dow into green territory.
The bellwether S&P 500 ended the session nominally higher.
Economically sensitive transports, semiconductors, small-caps and industrials outperformed the broader market, hinting that the economy is sturdy enough to withstand further rate increases from the Federal Reserve.
"It’s a go nowhere day," said Sam Stovall, chief investment strategist of CFRA Research in New York.
"Investors are still convincing themselves that the Fed will raise interest rates by 25 basis points in May which could add to the likelihood of an impending recession. And investor agita is increased ahead of (this week’s) CPI and PPI reports."
The Dow Jones Industrial Average rose 101.23 points, or 0.3%, to 33,586.52, the S&P 500 gained 4.09 points, or 0.10%, to 4,109.11 and the Nasdaq Composite dropped 3.60 points, or 0.03%, to 12,084.36.
Of the 11 major sectors of the S&P 500, six ended the session higher, led by industrials. Communication services and utilities suffered the largest percentage losses.
On Friday, a market holiday, the Labor Department released its March jobs report, which showed robust payrolls growth and a welcome but modest wage inflation cool-down.
While the report signaled the Fed's restrictive policy is beginning to have its intended economic dampening effect, it raised the odds that the central bank will move forward with another 25 basis point increase to the Fed funds target rate at the conclusion of its May policy meeting.
At last glance, financial markets have priced in a 72%likelihood of that happening, according to CME's FedWatch tool.
Recent indicators suggest a softening but sturdy economy, one that can withstand hawkish Fed policy as the central bank works to bring inflation closer to its 2% annual target.
"There’s clearly a disconnect between what the Fed is telling us they’re going to do and what the market believes the Fed is going to do," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "When the Fed repeats time after time what their priorities are and what they’re going to do, they’re going to do it."
Market participants will pay close attention to the consumer (CPI) and producer (PPI) price indexes, expected on Thursday and Friday, respectively, for a more complete picture on the extent to which inflation cooled in March.
On Friday, a trio of big banks - Citigroup Inc (NYSE:C), JPMorgan Chase & Co (NYSE:JPM) and Wells Fargo (NYSE:WFC) & Co - unofficially kick off first-quarter earnings season, and investors will be scrutinizing the reports for clues on the sector's overall health after two U.S. regional banks collapsed in March.
As of Friday, analysts expected aggregate S&P 500 earnings down 5.2% year-on-year, a stark reversal from the 1.4% annual growth expected at the beginning of the quarter, according to Refinitiv.
"Rarely can you injure yourself falling out of a basement window," Stovall added. "Expectations are set so low, the only surprise will be good news."
Shale oil producer Pioneer Natural Resources (NYSE:PXD) Co jumped 5.8% following a report that Exxon Mobil Corp (NYSE:XOM) held preliminary talks with the company about a potential acquisition.
Charles Schwab (NYSE:SCHW) Corp gained 4.8% in the wake of the broker's reported second-highest ever influx of client assets in March.
Chip stocks Micron Technology Inc (NASDAQ:MU) and Western Digital Corp (NASDAQ:WDC) gained 8.0% and 8.2%, respectively, on Samsung Electronics (OTC:SSNLF) Co Ltd's plans to cut chip production.
Advancing issues outnumbered declining ones on the NYSE by a 1.63-to-1 ratio; on Nasdaq, a 1.39-to-1 ratio favored advancers.
The S&P 500 posted 2 new 52-week highs and no new lows; the Nasdaq Composite recorded 50 new highs and 155 new lows.
Volume on U.S. exchanges was 9.09 billion shares, compared with the 12.28 billion average over the last 20 trading days.