U.S. stocks traded in a tight range on Monday as Wall Street tempered its expectations for this week's trade negotiations between Washington and Beijing and looked ahead to the latest monetary policy decision from the Federal Reserve.
The Dow Jones Industrial Average rose 28.90 points — about 0.1% — to finish at 27,221.35 as modest gains in Home Depot, Merck and Intel pulled the blue-chip index higher. The S&P 500 fell 0.16% to 3,020.97 as financials, consumer discretionary and communication services stocks lagged.
The tech-heavy Nasdaq Composite, meanwhile, dropped 0.44% to close at 8,293.33 as Amazon fell 1.5%, Microsoft lost 0.2% and Facebook shed 1.9%.
The Fed will announce its latest decision on whether to adjust interest rates at 2 p.m. ET Wednesday; Chairman Jerome Powell will also address the state of the economy in a press conference at 2:30 p.m. ET later Wednesday.
Despite a healthy economy and an unemployment rate under 4%, investors widely expect the central bank to cut its benchmark lending rate for the first time since 2008 by 25 basis points. The Fed, which seeks to keep inflation around 2%, has had trouble sustaining price growth in recent months despite a healthy economy and low unemployment.
That may hint that the current level of interest rates may be too high even though the benchmark is well below historical norms. Some economists and Fed officials think that rates need to be lowered in the face of decelerating GDP in the U.S. and a gloomier growth outlook overseas as Washington-led trade wars continue.
Investors are also likely to closely monitor whether the central bank will signal more cuts over the coming months. Economists mostly anticipate anywhere from one to three rate cuts this year.
"The E.U. and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product," the president said on Twitter. "In the meantime, and with very low inflation, our Fed does nothing - and probably will do very little by comparison. Too bad!"
U.S. and Chinese officials will convene in Shanghai this week in a latest attempt by the globe's two largest economies to craft a trade deal and end their year-long trade dispute. While investors last week heralded news of the face-to-face discussion with optimism, people close to the talks warned that the appetite for a sweeping deal have waned since the spring.
"The S&P 500 remains the pied piper for global risk markets yet it continues to struggle with current levels for the third time in the past 18 months," Michael Wilson, chief equity strategist at Morgan Stanley, wrote in a note to clients. "We think this latest surge will fail again, as we don't expect a Fed cut to rekindle growth the way market participants may be hoping, and now pricing."
"Thanks to the growth slowdown and the Fed's pivot, interest rates have fallen a long way since then. This has made US stocks more attractive on valuation, but the fundamentals are no longer strong," he added.
Those familiar with the talks told the Wall Street Journal that major breakthroughs are unlikely on issues that led to a breakdown in talks in early May but that more modest goals could be within reach. American and Chinese officials have struggled to reach a compromise over the protection of intellectual property and Beijing's subsidization of businesses.
In corporate news, drugmaker Pfizer plans to divest its off-patent drug business and marry it with generic-drug maker Mylan. The combined company, which will market Mylan's EpiPen and Pfizer's Viagra, will be domiciled in the U.S.
Pfizer fell 3.8% Monday while Mylan rose 12.5%.
Beyond Meat, the hot meat alternative IPO with a market cap bigger than a quarter of companies in the S&P 500, reports earnings after the bell. Seventy-five percent of companies have beaten estimates so far and 60% beat revenue expectations.
The stock fell 5.4% by the closing bell Monday.