Stocks end mixed ahead of rate hike

Wall Street capped a choppy day of trading with a mixed finish for stock indexes Monday, as investors brace for another sharp interest rate increase by the Federal Reserve this week as the central bank combats inflation.

The Standard & Poor’s 500 index edged up 0.1% after fluctuating between gains and losses. The Dow Jones industrial average rose 0.3%, and the tech-heavy Nasdaq composite fell 0.4%.

Smaller-company stocks fared better than the broader market, sending the Russell 2000 up 0.6%.

The major indexes are coming off solid gains last week after a mix of mostly better-than-expected corporate profit-reports. Falling yields in the bond market also helped, easing the pressure on stocks after expectations for rate increases by the Fed sent yields soaring much of this year.

On Wednesday, most economists expect the Fed to announce a second consecutive three-quarter-percentage-point hike in its short-term rate. Before this year, it hadn’t implemented an increase that large since 1994. It would put the Fed’s benchmark rate in a range of 2.25% to 2.5%, the highest since 2018.

Wall Street will closely watch a news conference by Fed Chair Jerome H. Powell on Wednesday to get a sense of policymakers’ next steps.

“The only question is will Powell sound a little less hawkish in his press conference, which could allow the market to continue to breathe a sigh of relief,” said Sam Stovall, chief investment strategist at CFRA.

The U.S. economy is slowing, but healthy hiring shows it isn’t yet in recession, Treasury Secretary Janet L. Yellen said Sunday on NBC’s “Meet the Press.” She spoke ahead of a slew of economic reports due this week that will shed light on an economy besieged by rampant inflation.

Since the Fed last met in June, the government has reported that inflation accelerated to a 9.1% annual rate, the most since 1981.

Still, some early signs suggest that inflation may be cooling from red-hot levels. Auto club AAA said on its website as of Monday that the average price of a gallon of regular gas is $4.36. That’s down 16 cents from a week ago and 55 cents cheaper than late June, when the average price was $4.91 a gallon. Crude oil prices have fallen nearly 10% this month alone.

On Thursday, the Commerce Department will release its first estimate of the economy’s output in the April-to-June quarter. Some economists forecast it may show a contraction for the second quarter in a row. The economy shrank 1.6% in the January-to-March quarter. Two straight negative readings is considered a recession.