S&P 500, Dow kick off week higher; U.S. inflation in focus

© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 26, 2023. REUTERS/Brendan McDermid/File Photo

By Bansari Mayur Kamdar and Johann M Cherian

(Reuters) -The benchmark S&P 500 and the Dow climbed higher on Monday following a choppy week, with investors looking ahead to a highly awaited U.S. inflation report due later in the week that could test the market's sharp recovery this year.

The main stock indexes ended the week lower on Friday with some investors taking profits after months of gains due to worries over economic data, mixed earnings and rising Treasury yields.

U.S. stocks have sharply rallied in 2023, with the benchmark S&P 500 clocking 17% gains year to date, fueled by optimism around artificial intelligence and hopes of a soft landing for the world's largest economy.

The U.S. consumer price data on Thursday could offer cues to the Federal Reserve's monetary policy path, after an employment report on Friday re-ignited fears that the central bank could keep rates higher for longer.

"In the last month's report, we saw the monthly print for CPI finally break into the downside with weaknesses seen in some parts of the goods market," said Charlie Ripley, senior investment strategist for Allianz (ETR:ALVG) Investment Management.

"But in the service side, it's been pretty sticky and that's one reason why it's taking a lot longer for inflation to subside."

New York Fed President John Williams, a voting member this year, said he expects interest rates could begin to come down in early 2024, as per a report, while Governor Michelle Bowman said additional interest rate hikes will likely be needed in order to lower inflation to the 2% target.

At 11:38 a.m. ET, the Dow Jones Industrial Average was up 320.49 points, or 0.91%, at 35,386.11, the S&P 500 was up 21.60 points, or 0.48%, at 4,499.63, and the Nasdaq Composite was down 17.61 points, or 0.13%, at 13,891.63.

Weighing on the tech-heavy Nasdaq, Apple (NASDAQ:AAPL), the world's most valuable firm, fell 2.2% extending its sharp losses from the previous session following a gloomy iPhone sales report.

Tesla (NASDAQ:TSLA) dropped 3.8% after the electric vehicle giant said that Vaibhav Taneja will replace Zachary Kirkhorn as its finance chief.

Overall, second-quarter earnings have been better-than-expected so far, with 79.1% of the 422 S&P 500 companies that have reported as of Friday beating analysts' estimates, according to Refinitiv data.

Class B shares of Berkshire Hathaway (NYSE:BRKa) gained 3.2% after the Warren Buffett-led conglomerate posted its highest-ever quarterly operating profit.

Sage Therapeutics sank 51.1%, while Biogen (NASDAQ:BIIB) slipped 0.5% after the U.S. drug regulator declined to approve the companies' joint first-of-its-kind postpartum depression (PPD) pill.

Tyson Foods (NYSE:TSN) slid 5.8% after the meat packer disappointed Wall Street expectations for third-quarter revenue, as customers scaled back on meat purchases.

Yellow Corp, a nearly 100-year-old U.S. trucking firm, filed for Chapter 11 bankruptcy protection on Sunday, dragging its shares 34.2% lower.

Advancing issues outnumbered decliners by a 1.65-to-1 ratio on the NYSE and for a 1.27-to-1 ratio on the Nasdaq.

The S&P index recorded 17 new 52-week highs and seven new lows, while the Nasdaq recorded 46 new highs and 128 new lows.