By Sruthi Shankar and Ankika Biswas
(Reuters) - The benchmark S&P 500 was little changed on Tuesday as investors stayed on the sidelines ahead of Wednesday's inflation data that could determine the U.S. Federal Reserve's next policy moves.
Losses in megacap stocks such as Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN) weighed on the tech-heavy Nasdaq, while gains in industrial stocks such as Caterpillar Inc (NYSE:CAT) boosted the Dow.
Hopes that the Fed will soon end its aggressive monetary policy tightening helped the S&P 500 stabilize so far in April after the collapse of two U.S. mid-sized lenders sparked a selloff last month.
A strong labor market report on Friday, however, lifted bets that the U.S. central bank will increase rates by 25 basis points in May, with money market traders pricing in a nearly 70% chance of such a move, according to CME Group's (NASDAQ:CME) Fedwatch tool.
This marks a shift in traders' bets of a pause in the Fed's policy tightening after recent weak economic data raised the possibility of a U.S. recession.
"There are certainly other macro indicators that show the labor market is slowing, and if we get good news on inflation, then there's a good possibility that the Fed pauses in May," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
"We are headed for a recession and I think it'll be a light one."
Data on Wednesday is expected to show consumer prices grew 5.2% in March after a 6.0% rise in February. However, core prices are seen rising 5.6%, at a slightly faster pace compared with a 5.5% rise in February.
Investors will also be scrutinizing earnings reports from the big U.S. banks Citigroup Inc (NYSE:C), JPMorgan Chase & Co (NYSE:JPM) and Wells Fargo (NYSE:WFC) & Co on Friday for clues on the overall health of the banking sector.
Analysts expect first-quarter profits at S&P 500 companies to fall 5.2% year-on-year, a stark reversal from the 1.4% annual growth expected at the beginning of the year, according to Refinitiv data.
At 9:53 a.m. ET, the Dow Jones Industrial Average was up 64.63 points, or 0.19%, at 33,651.15, the S&P 500 was up 0.74 point, or 0.02%, at 4,109.85, and the Nasdaq Composite was down 31.87 points, or 0.26%, at 12,052.48.
Remarks later on Tuesday from voting members of the Fed's rate-setting committee will be parsed for more clues on the central bank's policy moves.
Seven of the 11 major S&P sectors rose, with gains in industrial and material shares offsetting losses in technology stocks.
Shares of crypto-related companies such as Coinbase (NASDAQ:COIN) Global Inc, Riot Platforms Inc and Marathon Digital Holdings Inc climbed between 6.6% and 5.7% as bitcoin breached the key $30,000 level for the first time in 10 months.
U.S.-listed shares of Hexo Corp (TSX:HEXO) plunged 26.2% after Tilray (TSX:TLRY) Brands Inc said it would buy the Canadian cannabis company for $56 million. Tilray's shares also fell 7.1%.
CarMax Inc (NYSE:KMX) rose 9.1% as the used-car retailer reported a quarterly profit that beat estimates.
Moderna Inc fell 5.0% as the company said its closely watched flu vaccine did not meet the criteria for early success in a late-stage trial.
Advancing issues outnumbered decliners for a 3.35-to-1 ratio on the NYSE and a 2.31-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and no new low, while the Nasdaq recorded 32 new highs and 30 new lows.