Dow Jones ends slightly lower as stocks struggle for direction after hitting nearly 4-month highs

What drove markets

U.S. stocks struggled for momentum following a soft session out of Asia, where news that profits of China’s industrial companies increased by just 2.7% for the year to October raised concerns about deflation in the world’s second-biggest economy, damping sentiment across the region.

Still, analysts see stocks benefiting from positive momentum heading into year-end. The S&P 500 has advanced four weeks in a row, while benchmark bond yields have tumbled from 16-year highs amid hopes the Federal Reserve is finished raising borrowing costs.

“The market is coming out of a week of lower liquidity and it’s hard to extrapolate anything firm from the gyrations seen over the past two or three trading days,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments in Atlanta, which oversees roughly $2.5 billion.

“But the soft-landing view is still intact, with the market pricing in three to four cuts in the fed funds rate in 2024,” he said via phone on Monday. “The consumer has been what’s really powered the optimism for a soft landing and there’s a lot of focus on that behavior coming into the holiday season. The consumer is the driving force keeping us out of a recession.”

The data highlight of the week is likely to be Thursday’s personal-consumption expenditures price report for October. It is the Federal Reserve’s favored inflation gauge and may set the tone in bonds — and, by extension, stocks — in the short term. The first revision of third-quarter gross domestic product will be released the day before.

Investors will also hear from Fed Chair Jerome Powell on Friday.

Read: Stock market heads into year’s end with serious momentum. What that means for December and beyond.

Data over the weekend that showed the U.S. saw record online Black Friday spending appeared to support the view that the consumer is shrugging off tighter monetary policy.

“The U.S. consumer continues to defy expectations for a material slowdown amid elevated prices and firm Fed policy,” with shoppers spending a record $9.8 billion online for black Friday, up 7.5% from last year, said economists Lindsey Piegza and Lauren Henderson of Stifel, Nicolaus & Co. in Chicago.

“Behind the jump, however, was in part a rising use of ‘buy-now, pay later‘ options, suggesting an ongoing willingness to spend may not be as solid as the consumers’ ability to spend,” they said in a note.

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U.S. new-home sales fell 5.6% to a seasonally adjusted annual rate of 679,000 in October, from a revised 719,000 in September, the government reported Monday. Analysts polled by The Wall Street Journal had forecast new-home sales to show a seasonally adjusted annual rate of 725,000 in October.

Meanwhile, Treasury’s sale of $54 billion worth of two-year notes came in “a bit soft,” although its auction of $55 billion worth of five-year maturities was “solid,” according to strategist Ben Jeffery of BMO Capital Markets.

Companies in focus

• Shares of Nvidia Corp.
  NVDA,
  +0.67%
  and Tesla Inc.
  TSLA,
  -1.05%
  finished up by 1% and 0.3% respectively as investors continued to focus on the “Magnificent Seven” group, which has been driving the S&P 500’s gains this year.

• Shopify Inc.
  SHOP,
  -0.24%
  shares closed up by more than 4%, fueled by strong online holiday shopping data. As of early Monday, the stock was up around 55% for November and on pace for its best month on record, based on data since 2015.

• Shares of Crown Castle Inc.
  CCI,
  +4.36%
  ended up by 3.5% after activist investor Elliott Investment Management LP called for “significant changes,” including new executive and board leadership and a review of its fiber business. Elliott said the funds it manages have invested about $2 billion in the real-estate investment trust, focused on wireless infrastructure.

Jamie Chisholm contributed.