U.S. stocks nudged higher Monday morning as Wall Street clawed back from its worst week of the year so far and an upcoming inflation reading kept investors on their toes.
Sorrento Therapeutics (SRNE) was among big movers Monday morning, plunging 40% at the start of trading after the heavily shorted drugmaker, which was working on a COVID-19 treatment, filed for Chapter 11 bankruptcy protection in Texas.
On Friday, U.S. stocks closed out their worst weekly performance of 2023 so far. The S&P 500 finished down 1.1% for the week, the Dow Jones Industrial 0.2%, and the Nasdaq Composite 2.4%.
Wall Street is in for an eventful week of economic data with the Consumer Price Index (CPI) due out Tuesday, the government’s retail sales report in the queue for Wednesday, and the Producer Price Index (PPI) set for release Thursday.
Economists expect headline CPI rose 0.5% month-over-month in January — a notable jump from figures seen in recent months — while the annual headline number is projected to come down to 6.2% from 6.5% the prior month, estimates compiled by Bloomberg show.
Tuesday’s CPI reading will come as investors recalibrate expectations for high interest rates will go this year after Fed Chair Jerome Powell implied in a speech last week that the battle against inflation was in its early stages. For much of the year, many were betting the U.S. central bank would pause its interest rate hiking campaign this year.
The process “is going to take quite a bit of time, and is not going to be smooth,” Powell said in a sit-down interview with billionaire investor David Rubenstein at the Economic Club of Washington, D.C., last Tuesday. “We will likely need to do additional rate increases.”
“A combination of strong economic data and Fed guidance (January’s jobs report and Powell’s comments last week, mostly) have convinced markets that rates may be ‘higher for longer,'” DataTrek’s Nicholas Colas said in a note. “This week’s CPI report will be important in terms of giving the market more information on this key issue.”
Last week, the CME Group’s FedWatch Tool, which measures market expectations for the federal funds rate, showed the range with the highest probability at the end of the year was 4.50-4.75%, or the current rate. The new modal estimate now stands at 4.75-5.00%.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc