U.S. stocks were flat early Monday morning after modest gains earlier in the day as investors were cautiously hedging their bets on higher short-term interest rates arriving as soon as March and earnings season kicking off this week.
Investors were cautious after Fed officials said in December that plans to roll back ultra-low rates and other economic stimulus that has boosted share prices might be accelerated to cool U.S. inflation now at a four-decade high.
On Friday, Wall Street’s benchmark S&P 500 index fell 0.4% to 4,677.03, or about 2.5% below Jan. 3′s record high.
The Dow Jones Industrial Average slipped less than 0.1% to 36,231.66. The Nasdaq composite fell 1% to 14,935.90.
Investors are pricing a better than 79% probability that the Fed will raise short-term rates in March. A month ago, they saw less than 39% of a chance of that, according to CME Group.
Record-low interest rates have helped to boost stock prices despite bouts of unease about the coronavirus pandemic.
The Fed already has slowed bond purchases that were pumping money into the financial system to push down commercial lending rates. Notes from its December meeting indicated Fed officials might to cut off such purchases more quickly than previously planned.
Investors were rattled last week after notes from the latest Fed meeting showed officials thought the U.S. job market is healthy enough that it might no longer need ultra-low interest rates and other stimulus.
That was reinforced by U.S. employment numbers Friday that showed stronger-than-expected wages, though with only about half as much hiring as forecast.
Meanwhile, Asian stock markets were mixed Monday.
Shanghai and Hong Kong advanced. Seoul and Sydney declined. Japanese markets were closed for a holiday.
The prospect of earlier rate hikes “suggests that markets could continue to be roiled by volatility,” Tan Boon Heng of Mizuho Bank said in a report.
The Shanghai Composite Index gained 0.2% to 3,587.03 and the Hang Seng in Hong Kong advanced 0.7% to 23,658.91.
The Kospi in Seoul fell 1% to 2,926.72 and Sydney’s S&P ASX 200 lost 0.1% to 7,447.10.
India’s Sensex added 0.5% to 60,046.96. Bangkok was flat, New Zealand declined and Singapore and Jakarta advanced.
In energy markets, benchmark U.S. crude rose 9 cents to $78.99 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 56 cents on Friday to $78.90. Brent crude, used to price international oils, added 9 cents to $81.84 per barrel in London. It lost 24 cents the previous session to $81.75.
The dollar gained to 115.81 yen from Friday’s 115.56 yen. The euro declined to $1.1329 from $1.1362.