NEW YORK — Wall Street is drifting Monday ahead of a week of reports showing how strong U.S. shoppers remain, amid hopes their spending can keep the economy out of a recession.
The S&P 500 was 0.3% higher in morning trading after flipping an early loss. The Dow Jones Industrial Average was virtually unchanged at at 35,281, as of 10:40 a.m. Eastern time, and the Nasdaq composite was 0.5% higher.
U.S. Steel jumped to one of the market’s biggest gains, up 26.1%. It said over the weekend that it rejected a buyout offer from Cleveland-Cliffs and that it’s heard multiple offers.
Cleveland-Cliffs rose 3.8% after it said it offered more than $7 billion in cash and stock for the steelmaker and that it’s ready to move on the offer immediately.
On the losing end of Wall Street was Nikola, which sank 10.8%. The zero-emission truck company recalled more than 200 of its electric vehicles after an investigation indicated a problem with a component in the battery pack could be the cause of a prior fire. It earlier suggested foul play could be at play in the truck fire at its headquarters.
Across the rest of the market, trading was relatively quiet. The S&P 500 has retrenched by 2.4% in August after soaring 19.5% through the first seven months of the year. Critics have been saying such a pullback was due, arguing Wall Street too quickly and forcefully latched onto the belief that inflation would continue to cool and the economy would avoid a recession.
A big bulwark keeping the economy afloat has been strong spending by U.S. consumers, which has been propped up by a remarkably resilient job market.
On Tuesday, the U.S. government will give the latest monthly update on sales at retailers across the country. Economists say it’s one of the week’s most important reports, and they expect it to show growth accelerated to 0.4% in July from 0.2% in June.
Several big retailers are also on the schedule this week to show how much profit they made from April through June. Home Depot, Target, TJX and Walmart will all be reporting this week, as earnings reporting season for the spring hits its tail end.
Inflation has been moderating since hitting a peak last summer, but it remains high and is denting Americans of all incomes.
Conditions may be getting only tougher in upcoming months, as rising interest rates make credit-card and other payments more expensive. Student loan payments will also weigh on consumers, and many have been spending down savings that had been built up during the pandemic.
Economists at Deutsche Bank say their expectations for a stumble in consumer spending during the last three months of the year are a reason for their forecast of a a mild recession lasting through the first half of next year.
The week’s other big economic highlight will be Wednesday’s release of the minutes from the Federal Reserve’s last meeting. At that meeting, the central bank raised its main interest rate to the highest level in more than two decades. It was the Fed’s 11th increase in 17 months as it tries to corral the worst inflation since the 1980s.
The hope on Wall Street is that will prove to be the final hike of this cycle and that the next move for the Fed will be to cut rates. That would provide some relief because high rates work to lower inflation by bluntly slowing the entire economy and hurting prices for stocks and other investments.
Traders broadly expect the Fed to hold rates steady at its next meeting in a little more than a month, according to data from CME Group. They also have some bets saying the Fed will begin cutting rates early next year.
That could prove to be too optimistic, according to David Mericle, economist at Goldman Sachs.
He’s forecasting rate cuts could begin in the spring of 2024, from April through June, as the Fed waits for inflation and the pressure pushing upward on it to fall enough. One potential hiccup could be that the Fed does not want rate cuts to boost prices for stocks and other investments too much.
Mericle said he still sees less of a risk of a recession than the market generally.
In the bond market, the yield on the 10-year Treasury rose to 4.18% from 4.16% late Friday. It helps set rates for mortgages and other important loans.
The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.94% from 4.90%.
In stock markets abroad, indexes were mixed in Europe after mostly falling in Asia.
China’s waning economic recovery remains a focus for many investors, and stocks fell 1.6% in Hong Kong and 0.3% in Shanghai.
AP Business Writers Matt Ott and Joe McDonald contributed.