The S&P 500 was little changed Monday as the broader market index tried to recover from last week’s losses as traders weighed the possibility of a U.S. recession.
The Dow Jones Industrial Average was trading 161 points higher, or 0.5%. The S&P 500 was flat. Both benchmarks fell earlier in the day. The Nasdaq Composite lagged, falling 0.8%.
The major averages are coming off a difficult week as concerns about slowing U.S. economic growth, higher Federal Reserve rates, and rising inflation have weighed on market confidence. The Dow Jones posted a seven-week losing streak on Friday, the longest since 2001. The S&P 500 posted a six-week decline, the longest since 2011.
“We continue to transition through this interest rate-driven repricing,” said Bill Northey, senior chief investment officer at U.S. Bank Wealth Management. “So as the U.S. Treasury yield curve has continued to move higher in anticipation of higher realized inflation and Fed policy tightening, we’ve seen a steady and broad-based adjustment in asset valuations that have occurred in line with those growing inflation concerns.”
Energy led gains in the S&P 500, with the sector rebounding more than 3%. Occidental Petroleum was the best-performing energy stock on Monday, up more than 6%. Marathon Oil, meanwhile, gained 4.2%. Those gains came as U.S. oil prices rose 3% on bets that China could recover from an economic slowdown caused by the Covid blockades.
Treasury yields have soared this year as the Fed tightens monetary policy to avoid decades-high inflation. The benchmark 10-year rate started the year at about 1.5%; it traded at around 2.84% on Monday and briefly eclipsed the 3% mark earlier this month.
In turn, the major averages have fallen well below their all-time highs.
The Dow Jones and S&P 500 are 12.3% and 16.3%, respectively, below the all-time highs reached in January. The Nasdaq is squarely in bear market territory, down more than 27% from its November record high.
To be sure, some analysts believe those declines may soon point to an attractive entry point for the broader market index, based on a long-term perspective.
“The S&P 500 is rapidly approaching a level that, historically, has indicated that concerns about future growth are discounted,” Citi analyst Scott Chronert wrote in a note.
Meanwhile, strategists at RBC Capital Markets said in a Monday note that the S&P 500 is at a crossroads as it struggles to find a bottom. If the broad market index holds at 3850, a figure close to the intraday record that the S&P 500 nearly surpassed last week, the strategists believe stocks are matching the decline of late 2018.
“The S&P 500 still trades as if it is experiencing a growth scare, a framework that has been pointing down on the S&P 500 at ~3850,” wrote RBC Capital Markets strategist Lori Calvasina. “Current trends in economic forecasts continue to support the idea that this is the right way to think about how much stocks should fall, although we remain mindful that could change.”
Other notable results Monday included health care stocks. Eli Lilly shares jumped 4% after the Food and Drug Administration approved Mounjaro to treat type 2 diabetes. The drug is also being investigated for potential use in treating obesity and overweight. Pfizer’s share price rose 1.4% and AbbVie’s share price rose 1.3%.
On the other hand, Spirit Airlines’ shares rose 12% after JetBlue announced a tender offer to acquire the airline for $30 a share. Carvana’s share price rose 5% after the used car company issued expectations of significant core earnings in 2023 and outlined a plan to reduce costs.