Stocks drift ahead of week's deluge of profit, economic data

NEW YORK (AP) — U.S. stock indexes are drifting Monday, as Wall Street remains hesitant to make big moves amid questions about where the economy, interest rates and corporate profits are heading.

The S&P 500 was 0.1% lower in midday trading after barely budging last week. The Dow Jones Industrial Average was up 14 points, or less than 0.1%, at 33,823, as of 11 a.m. Eastern, while the Nasdaq composite was 0.4% lower.

Coca-Cola was rising 0.6% after reporting stronger profit and revenue for the first three months of the year. It was the only company in the S&P 500 to report Monday morning, but more than 170 others are scheduled to follow it this week.

The question is whether they can top the low bar that Wall Street has set for them, and what CEOs for those companies say about prospects for profits later this year. Analysts expect S&P 500 companies to report a roughly 6% drop in earnings per share from a year earlier, which would be their worst showing since the spring of 2020 when the pandemic paralyzed the economy.

Some of Wall Street's most influential companies are set to report this week, including Microsoft on Tuesday and Amazon on Thursday. The majority of companies have been topping earnings forecasts so far this reporting season, as is usually the case.

Expectations are broadly low because inflation remains high and interest rates are much higher than a year earlier, which has hurt swaths of the economy.

The Federal Reserve has jacked up interest rates at a furious pace in hopes of undercutting high inflation. High rates can do that but only by bluntly slowing the entire economy. That ups the chances for a recession, while also hurting prices for investments.

Besides this week's blizzard of earnings reports, Wall Street is also waiting for the first estimate of how quickly the U.S. economy grew in the first three months of the year, among other data. Economists predict it will show a slowdown to growth of 1.9% at an annual rate, down from 2.6% in the fourth quarter.

Higher interest rates have already slowed the housing market by making mortgages more expensive. Manufacturing and other areas of the economy have also shown pain, while the job market has remained remarkably resilient.

The report on the U.S. economy will be one of the final pieces of data before the Federal Reserve's next meeting, scheduled for next week. Much of Wall Street expects it to raise interest rates at least one more time, before likely taking a pause.

It has been raising rates at every one of its meetings for more than a year, sometimes by double or triple the typical amount. Its overnight rate now sits in a range of 4.75% to 5%, up from virtually zero at the start of last year.

Many traders are betting the Fed will have to cut interest rates later this year in order to prop up the economy. But the Fed has so far been insistent that it will hold rates high at least through the end of this year. Inflation remains too high for its liking, even if it has come down from its peak last summer.

"The Fed seems determined to fight inflation even if a more significant slowdown arrives," Morgan Stanley strategists led by Michael Wilson wrote in a report.

High rates have already caused cracks in the banking system, with the second- and third-largest US. bank failures in history rocking markets last month. The worst of the crisis seems to have passed, but scrutiny remains harsh on smaller and mid-sized banks that seem to be under the most threat of seeing customers yank their deposits.

First Republic Bank, which has been at the center of the spotlight, will report its latest quarterly results after trading closes Monday. Its stock jumped 11.1% before the report, making it one of the biggest gainers in the S&P 500.

The banking industry's struggles were global, as higher interest rates worldwide pushed investors to hunt for potential weak links. Credit Suisse, a giant investment bank, said Monday that it saw more than 61 billion Swiss francs (nearly $69 billion) in outflows during the first three months of the year. It's in the process of getting swallowed by rival UBS after regulators arranged for its takeover.

France and Germany also report economic growth this week.

"There is no doubt that the global economy is weakening and vulnerable to further slowing," Clifford Bennett of ACY Securities said in a report.

Stock indexes across Europe were mixed, while markets in Asia also made only modest moves. Japan's Nikkei 225 added 0.1%, while Hong Kong's Hang Seng slipped 0.6%.

On Wall Street, one of the biggest losers was Bed Bath & Beyond, which dropped 23% to 23 cents after filing for bankruptcy protection.

The stock of the struggling retailer went on a wild ride in recent years as investors bet on whether it could successfully turn around its operations, sometimes surging or plunging by 20% or more in a single day. The arrival and departure of an influential investor who played a key role in the GameStop "meme-stock" craze helped drive some of the biggest swings.

In the bond market, the yield on the 10-year Treasury fell to 3.51% from 3.57% late Friday.