US stocks ended Monday with modest gains after fluctuating throughout the trading session as investors tried to come to terms with Federal Reserve policy that may remain restrictive for longer than previously anticipated.
After a rough week on Wall Street, the S&P 500 and the Nasdaq 100 have recovered. The 10-year treasury yield has fallen to around 3.92%. The dollar index fell. The price of gold and copper increased.
Investors have been recalibrating their forecasts for where interest rates will end up, especially since inflation hasn't slowed as expected by the Fed. Rates are expected to peak at 5.4% this year, up from around 5% just a month ago. Investors remained nervous after Fed Governor Phillip Jefferson reiterated the central bank's 2% inflation target on Monday.
The new US data that investors are dealing with on Monday point to an economy that is still strong, despite the Fed's ongoing rate hikes. Pending home sales in the United States increased by the most since June 2020, which could put further pressure on the Federal Reserve to remain hawkish.
Meanwhile, orders for durable goods fell sharply, the steepest drop since April 2020, indicating a slowdown in commercial aircraft bookings. Durable goods orders, excluding transportation equipment, rose more than expected. Orders for business equipment from US factories increased in January as companies continued to make longer-term capital investments despite uncertainty about the economy's direction.