Wall Street drifts to start what could be a quiet week

Stock indexes drifted lower Monday as Wall Street’s pullback from its big recent rally carried into a second week.

The Standard & Poor’s 500 fell 19.51 points, or 0.4%, to 4,328.82. It’s still close to its highest level in a year, reached a couple of weeks ago.

Technology stocks were the heaviest weights on the market, pulling indexes lower while the majority of stocks on Wall Street rose. They dragged the Nasdaq composite to a loss of 156.74, or 1.2%, to 13,335.78. The Dow Jones industrial average was sturdier and slipped 12.72 points, or less than 0.1%, to 33,714.71.

Carnival fell 7.6% for the sharpest drop in the S&P 500 despite reporting stronger results and revenue for the latest quarter than expected. It gave forecasts for upcoming earnings per share and other measures that may have disappointed some investors, particularly after its stock has already cruised upward by more than 80% this year.

Tesla was another stock whose torrid run cooled amid concerns that it went overboard. It fell 6.1% after roughly doubling this year so far. For the overall S&P 500, last week marked the first losing week in the last six for the index, and critics have been saying it was due for a pullback.

On the winning side of Wall Street was PacWest Bancorp, one of the banks that Wall Street has punished in its hunt for the system’s next potential weak link. It rose 4% after selling a portfolio of loans to strengthen its cash position.

Electric vehicle company Lucid Group rose 1.5% after announcing a deal where it would provide powertrain and battery systems to Aston Martin.

Trading was mostly quiet in financial markets around the world as the fundamental question remains for investors: Can the economy avoid a painful recession after central banks around the world hiked interest rates at a blistering pace to get inflation under control?

Adding to the uncertainty was a short-lived armed rebellion in Russia over the weekend. The war in Ukraine has helped push upward on inflation around the world, but investors mostly looked past the brief mutiny by mercenary soldiers.

Crude oil prices ticked slightly higher, unlike in the first days of the war in Ukraine, when they soared immediately. A barrel of U.S. crude rose 21 cents to $69.37. Brent crude, the international standard, added 33 cents to $74.18 per barrel.

This week does not have many economic or earnings reports that can help answer investors’ main question. A report Friday will show how the Federal Reserve’s preferred measure of inflation behaved in May; data arrived earlier this month on prices at the consumer and wholesale levels.

More emphasis will be on June’s inflation data, due next month. Also upcoming is the next monthly jobs report, which will arrive in two Fridays.

For now, traders are betting those reports will push the Fed to raise rates by a quarter of a percentage point at its next meeting, which runs July 25-26, according to data from CME Group. The Fed has been hiking its key overnight interest rate at a breakneck pace since early last year, though it refrained from making a move earlier this month. More importantly, much of Wall Street expects a hike next month to be the final one of this cycle.

The Fed, meanwhile, has suggested that it could raise rates twice more because inflation remains high, even if it has come down from its peak last summer. The difference in expectations is minor, but each hike could mean a much bigger effect on the economy than the last.

High rates undercut inflation by applying the brakes to the entire economy, and they raise the risk of a recession if they stay too high, too long.

High rates have helped cause several U.S. banks to fail, rattling confidence in the system. The manufacturing industry has also been contracting for months, and analysts say they don’t know what could break next in the economy under the weight of much higher rates.

“We have a slowing U.S. economy, a slowing global economy, all with ongoing extreme inflation and high and going higher interest rate levels,� said Clifford Bennett, chief economist at ACY Securities. “There is no bullish stock market scenario here.�

That’s even though the S&P 500 has climbed more than 20% since mid-October. That means Wall Street, by one definition, has moved into a bull market, which is what traders call a long-term upward run for stocks.

In the bond market, the yield on the 10-year Treasury fell to 3.72% from 3.74% late Friday. It helps set rates for mortgages and other important loans.

The two-year yield, which moves more on expectations for the Fed, slipped to 4.73% from 4.75%.

In stock markets abroad, indexes were mixed in Europe. Stocks in Shanghai fell 1.5%, but indexes moved more modestly elsewhere in Asia.