U.S. stock indexes ended Monday's session little changed, as volume fell off in the run-up to the Federal Reserve's two-day meeting.
The Nasdaq crept 0.2% higher while the S&P 500 was flat. The blue chip Dow Jones industrial average slipped 0.1%. The small cap Russell 2000 outperformed with a 0.4% gain. Volume was down on both major exchanges, according to preliminary data.
Blue chips were mostly off. Intel (INTC) fell 2% despite announcing it would acquire Mobileye (MBLY) in a $15 billion deal. Mobileye's stock jumped 28% on the news.
On the upside in the Dow, Home Depot (HD) was among leaders with an incremental gain — 0.4% in soft volume.
As the Fed's meeting approaches, individual investors should be aware of four factors that could determine the market's next thrust or next dive.
No. 1: A rate hike from the Federal Reserve is widely expected. Chances are a rate hike is already baked into stock prices. The swing factor will be what the Fed says or hints at in relation to further rate hikes this year. The Fed officials have signaled that there will be three rate hikes in 2017 — two more after Wednesday's presumed increase. The Street will be parsing the language to get a sense of what comes next.
No. 2: A marketwide pullback to digest gains since early November is still possible. The Nasdaq, for example, gained 17% from its low Nov. 4 to its high March 1. So far the current pullback, if it is fair to call it a pullback, has reached only 1.7% on the Nasdaq. The Nasdaq hasn't suffered a significant pullback since bottoming about 13 months ago
No. 3: A change in sector leadership would have consequences. Chips and bank stocks have been the leaders of the current uptrend. But while chips are in the No. 1 spot, banks fell to No. 4 of 33 sectors going into Monday's session. It's possible that banks could recover the No. 1 or No. 2 perch they held for months. But if something else rotates into the leadership, that could create some turbulence.
No. 4: Optimism matters. Before Tuesday's open, the National Federation of Independent Business will release its February optimism gauge for small businesses. Since small business accounts for most job creation, this sentiment index is important. The Street's consensus number is 105, down from January's 105.9 reading. The range of estimates runs from 102.5 to 106.8. January's reading followed December's biggest month-over-month increase in the survey's history.
West Texas intermediate crude oil was nearly unchanged at $48.46.
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