Wall Street Little Changed After Inflation, Jobs Data

U.S. stocks closed little changed Thursday as news of hotter-than-expected inflation and signs of labor market strength dampened hopes for early interest rate cuts by the Federal Reserve this year, but a fall in Treasury yields kept declines in check.

Equities opened higher and the benchmark S&P 500 briefly surpassed its record closing high of 4,796.56, hit in January 2022, before erasing initial gains.

After ending 2023 with a strong rally, stocks have struggled to find upward momentum, with the S&P 500 roughly unchanged on the year, as mixed economic data and Fed officials' comments have led investors to scale back expectations for the timing and size of any rate cuts from the U.S. central bank this year.

The U.S. Labor Department reported that consumer prices rose more than expected in December, with Americans paying more for shelter and healthcare. A separate report showed the number of people filing new claims for unemployment benefits unexpectedly fell last week to 202,000.

"They're just understanding it for what it was, the thing that pushed it up was primarily shelter," said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

"Nobody believes that is going to be a persistent go-forward problem apart from inflation so, the thing that drove the 'hot print' was something that everybody's kind of discounting."

Comments from some Fed officials have pushed back on potential rate cuts. On Wednesday, Federal Reserve Bank of New York President John Williams said it was too soon to call for rate cuts as the central bank still had some distance to go on getting inflation back to its 2% target.

Cleveland Fed President Loretta Mester said on Thursday the path of inflation back to the 2% target rate reflected in the latest CPI figures meant it was likely too soon to cut rates in March. Richmond Fed President Tom Barkin said he was still waiting to be convinced the pace of price increases will stabilize and inflation gains have been too narrowly focused on goods.

According to preliminary data, the S&P 500 lost 3.17 points, or 0.07%, to end at 4,780.28 points, while the Nasdaq Composite gained 0.54 points, or 0.00%, to 14,970.19. The Dow Jones Industrial Average rose 14.20 points, or 0.04%, to 37,708.65.

A fall in Treasury yields helped keep losses for equities in check, after an auction of $21 billion in 30-year bonds was well received.

Microsoft briefly overtook Apple as the world's most valuable company, after the iPhone maker's shares dropped nearly 4% since the year began due to concerns over falling demand. Microsoft's shares rose slightly, while Apple fell modestly.

Nearly all of the S&P 500's 11 major sectors declined, with only energy and technology in positive territory.

Crypto stocks such as Coinbase, Bitfarms and Riot Platforms reversed early gains and turned lower. The U.S. securities regulator approved the first U.S.-listed exchange-traded funds (ETF) to track spot bitcoin late on Wednesday.

Citigroup fell after a filing showed the lender booked about $3.8 billion in combined charges and reserves that will erode its fourth-quarter earnings, due to be reported on Friday.

Other banks like JPMorgan Chase, Bank of America and Wells Fargo were all lower ahead of their earnings reports on Friday.