Macy's, Lululemon Fall After Cautious Forecasts

Stocks gave up early gains and drifted to a mixed close on Wall Street. Weakness in health care companies worsened throughout the day. Stocks are coming off their first weekly gain in five on hopes the Federal Reserve may ease up on its economy-shaking hikes to interest rates as inflation cools, the AP reports. The S&P 500 ended up just barely lower on Monday after being up as much as 1.4% in the early going. The index fell 2.99 points, or 0.1%, to 3,892.09 Gains for tech companies mostly held up, leaving the Nasdaq 0.6% higher at 10,635.65 . The Dow Jones Industrial Average fell 112.96 points, or 0.3%, to 33,517.65.

Treasury yields fell further Monday as traders adjusted bets for what the Fed will do on interest rates. They dropped Friday after data showed workers are winning weaker raises than in earlier months. While that's discouraging for workers who are still failing to see pay keep up with rising prices, it could ultimately mean less upward pressure on inflation. Lower rates tend to help high-growth and technology stocks in particular, and they were some of the market's leaders Monday. Tesla jumped 5.9%, Nvidia rose 5.2%, and Advanced Micro Device climbed 5.1% for some of the biggest gains in the S&P 500. Analysts warn more bumpiness is almost surely on the way for the stock market.

Even if inflation is slowing, the Fed has pledged to hike rates still further and them to hold them at a high level for a while to make sure the job is done on inflation. Warnings are also coming for what look to be lackluster earnings reports from companies, which are contending with higher labor costs and other expenses that eat into their profits. Some retailers on Monday offered discouraging financial updates. Macy's shed 7.7% and Lululemon Athletica fell 9.3% after issuing cautious forecasts. "With 2022 behind us, investors are now primarily focused on the profit outlook for the coming year," strategists at Goldman Sachs wrote in a report. For the full year of 2023, they see zero growth for S&P 500 earnings per share. And that's if the economy avoids a recession. If a recession does hit, as many on Wall Street suspect, they say earnings could fall 11%. (More stock market stories.)