NEW YORK — U.S. stocks are drifting near their record heights on Monday as Wall Street waits for an upcoming update on inflation.
The S&P 500 was virtually unchanged and flirting with its all-time high set two weeks ago. The Dow Jones Industrial Average was up 77 points, or 0.2%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was down 0.2%, coming off its own record.
The highlight of this week for Wall Street is likely to arrive on Tuesday, when the government will report how bad inflation was across the country in July. Economists expect it to show U.S. consumers had to pay prices for groceries, gasoline and other costs of living that were 2.8% higher in July from a year earlier, a slight acceleration from June’s 2.7% inflation.
Inflation has remained stuck above 2%, even if it has improved substantially from its peak above 9% three years ago. And the worry is that President Donald Trump’s tariffs could push it higher.
That in turn is raising fears about a potential worst-case scenario called “stagflation,” where the economy stagnates but inflation remains high. The Federal Reserve has no good tool to fix both problems at once, and it would likely need to concentrate on either the job market or inflation first. But helping one of those areas by raising or lowering interest rates would likely hurt the other.
A top Fed official, Michelle Bowman, said on Saturday that she believes the job market is the bigger concern. She is still backing three cuts to interest rates by the Fed this year following this month’s stunning, weaker-than-expected report on the U.S. job market. Trump himself has also been angrily calling for cuts to interest rates to support the economy.
Other Fed officials, led by Chair Jerome Powell, are more hesitant. Powell has said he wants to wait for more data about how Trump’s tariffs are affecting inflation before the Fed makes its next move, and Tuesday’s update on the consumer price index may offer a big clue about that.
Strategists at Stifel are warning that stagflation may already be on the way, with spending by U.S. consumers slowing, and they warn that it could cause the U.S. economy to slow to a crawl by the second half of the year. That in turn could create a reckoning for investors after they sent stock prices soaring to records from their low point in April.
“Rate cuts cannot save an overvalued S&P 500,” according to the strategists, led by Thomas Carroll and Barry Bannister.
One way companies can make their stock prices look less expensive is by delivering bigger profits.
Micron Technology climbed 4.8% Monday after raising its forecasts for profit and revenue in the current quarter, which will end later this month. The maker of memory for computers said it’s benefiting from higher prices for its products.
AMC Entertainment jumped 7.5% to shave its loss for the year so far, which came into the day at 26.4% after it reported better results for the spring than analysts expected. The movie-theater chain said each customer paid more for their tickets than ever before, while also spending more on food and drinks.
On the losing side of Wall Street was C3ai after the artificial-intelligence application software company warned it may report an operating loss as large as $124.9 million for its first quarter. CEO Thomas Siebel called the first-quarter sales results “completely unacceptable,” and its stock tumbled 31%.
In stock markets abroad, indexes were mixed amid mostly modest movements across Europe and Asia.
In the bond market, the yield on the 10-year Treasury remained at 4.27%, where it was late Friday.
AP Business Writer Elaine Kurtenbach contributed.