S&P 500, Dow kick off week higher; U.S. inflation in focus

The benchmark S&P 500 and the Dow climbed higher on Monday following a choppy week, with investors looking ahead to a highly awaited U.S. inflation report due later in the week that could test the market’s sharp recovery this year.

The main stock indexes ended the week lower on Friday with some investors taking profits after months of gains due to worries over economic data, mixed earnings and rising Treasury yields.

U.S. stocks have sharply rallied in 2023, with the benchmark S&P 500 (.SPX) clocking 17% gains year to date, fueled by optimism around artificial intelligence and hopes of a soft landing for the world’s largest economy.

The U.S. consumer price data on Thursday could offer cues to the Federal Reserve’s monetary policy path, after an employment report on Friday re-ignited fears that the central bank could keep rates higher for longer.

“In the last month’s report, we saw the monthly print for CPI finally break into the downside with weaknesses seen in some parts of the goods market,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

“But in the service side, it’s been pretty sticky and that’s one reason why it’s taking a lot longer for inflation to subside.”

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