Stocks take a breather as key inflation data eyed

STORY: U.S. stocks closed mixed and somewhat muted on Tuesday, ahead of inflation and other economic data that could shed light on the possible timing of a Federal Reserve interest rate cut.

The Dow dipped a quarter-percent, while the S&P 500 added almost two-tenths of a percent and the Nasdaq climbed nearly four-tenths.

While artificial intelligence-related stocks sent the S&P to new highs last week, this week’s spotlight is on Thursday's January personal consumption expenditures price index, or PCE, the Fed's preferred inflation gauge.

Kevin Mahn is President and Chief Investment Officer at Hennion & Walsh Asset Management.

“If that report comes in hot, as we saw with both CPI (Consumer Price Index) and PPI (Producer Price Index), you could see the market sell off a little bit. The market has certainly got ahead of itself this year already pricing in a perfect execution of a soft landing with the belief that interest rate cuts are coming. If those interest rate cuts don't come until later in the third quarter or the fourth quarter of this year, you could actually see the market give back some of its gains. So don't assume that the short-term bouts of volatility are behind us, but better days are indeed ahead once the Fed does start cutting interest rates, provided that inflation continues to moderate.”

Stocks gained some late support Tuesday from Apple, which erased earlier declines to close up just shy of one percent after Bloomberg News reported the iPhone maker canceled work on its electric car, shifting some employees to its artificial intelligence project.

But UnitedHealth dropped just before the closing bell to end down more than 2% as the biggest drag on the Dow after the Wall Street Journal reported the U.S. Department of Justice has launched an antitrust investigation into the company.

And Viking Therapeutics surged 121% after its experimental drug to treat obesity helped patients achieve "significant" weight loss in a mid-stage study. In turn, Amgen, which is also developing a weight-loss drug, lost more than 2.5%.