Wall Street hangs near records ahead of inflation report

NEW YORK (AP) — Wall Street is holding relatively steady Monday following its latest record-setting week.

The S&P 500 was 0.1% lower in late trading after closing Friday above the 5,000 level for the first time. The Nasdaq composite was down 0.3%. Earlier in the day, it was hovering just above its alltime closing high set in 2021.

The Dow Jones Industrial Average was up 112 points, or 0.3%, with less than an hour remaining in trading, and and on track to surpass its own record set last week.

Conditions are calm across markets, with yields also moving relatively little in the bond market. The next big event for the market could be Tuesday's update on inflation across the United States, which economists expect to show a drop back below the 3% level.

In the meantime, Diamondback Energy climbed 9.2% after it said it would buy Endeavor Energy Resources in a deal valued at roughly $26 billion, including Endeavor's debt. Diamondback is using both cash and stock to pay for the purchase of the privately held exploration and production company.

Trimble rose 4.7% after the technology provider reported stronger profit and revenue for the latest quarter than analysts expected. The company, whose products are used in the construction, mapping and other industries, shook off an earlier loss after it also gave a forecast for revenue over 2024 that fell short of Wall Street's estimates.

Big companies in the S&P 500 have mostly been reporting better results than expected for the final three months of 2023. More than two thirds of the companies in the index have already reported their results, but several big names are still to come this upcoming week. They include Coca-cola on Tuesday, Kraft Heinz on Wednesday and Southern Co. on Thursday.

The smallest companies in the market, meanwhile, are still in the relatively early days of their profit reporting season. But they've been beating analysts' expectations by even more than their big rivals, according to Bank of America strategists.

Worries have grown about how top-heavy the stock market has become, where the seven biggest companies have accounted for a disproportionate amount of the S&P 500's rally to a record. If more companies aside from the group known as the "Magnificent Seven" can deliver strong profit growth, it could soften the criticism that the market has become too expensive.

Another worry for the market has been uncertainty about just how much danger lurks for the economy in the loans and other holdings banks have on their balance sheets that are tied to commercial real estate.

The widespread expectation, even among top U.S. government officials, is that weakness for office buildings and other commercial projects will mean at least some pain for banks. But no one can say how much for sure.

That's why so much focus has been on New York Community Bancorp recently. It shocked investors roughly two weeks ago when it announced a surprise loss for its latest quarter. Some of the pain was due to its acquisition of Signature Bank during the industry's mini-crisis last year. But worries about commercial real estate also played a role.

New York Community Bancorp's stock has roughly halved since that surprise report, but it was doing better on Monday. It rose 1.3%.

An index measuring stock prices across the regional banking industry was also higher, up 2.9%.

In the bond market, yields were moving very little. The yield on the 10-year Treasury slipped to 4.16% from 4.18%, late Friday.

The two-year Treasury yield, which more closely tracks expectations for the Federal Reserve, dipped to 4.47% from 4.48% late Friday.

Inflation has been cooling enough that the Federal Reserve has hinted it may cut its main interest rate several times this year. Such cuts typically juice financial markets and the economy, and they would release pressure that's built up since the Fed has taken its main interest rate to the highest level since 2001.

After earlier hoping cuts to rates could begin as soon as March, traders have since pushed their forecasts out to May or June. Reports showing the U.S. economy and job market remain remarkably solid, along with some comments from Fed officials, have been forcing the delays.

If the Fed ends up making traders wait even longer than expected for rate cuts, it could upset stock prices that have already shot upward on the assumption of lots of good news, according to Marc Dizard, chief investment strategist at PNC Asset Management Group. Besides lower interest rates, that also includes stronger convictions for no recession for the U.S. economy, inflation continuing to come down and corporate profits growing more strongly.

"There isn't a whole lot more than can really go right," he said.

In stock markets abroad, indexes were modestly higher in much of Europe. In Asia, several markets were closed for holidays.