U.S. stocks were largely flat during early trading on Thursday as traders rotated funds out of technology shares into sectors more sensitive to the economy, while bond prices advanced. A key U.S. inflation report scheduled for release on Friday is anticipated to provide signs of easing price pressures.

At 10:08 AM New York time, the S&P 500 was essentially unchanged, even though more than 320 of its component stocks gained. The Nasdaq 100 Index declined by 0.3%, while the Dow Jones Industrial Average rose by 0.4%. The S&P 500 Equal Weight Index, which removes biases related to company market capitalization, reached a record high, highlighting the broad participation in the market advance. A closely watched exchange-traded fund tracking software companies retreated. Cisco Systems dropped 9.5% due to weak margin forecasts.

Ahead of the U.S. Consumer Price Index release, Treasury yields edged lower. Data released on Thursday indicated that initial jobless claims fell last week, following a significant increase previously attributed to severe winter weather.

Traders are awaiting Friday's CPI data. Market participants expect the core inflation measure, which excludes food and energy costs, to show its slowest annual pace since early 2021. Given stable labor market signals and persistently high inflation, the Federal Reserve chose to hold interest rates steady in January.

One analysis concluded that the current economic situation does not indicate a broad-based disinflationary trend, nor does it suggest an acceleration of inflation.

Another analyst noted that the Treasury market has entered a wait-and-see mode ahead of Friday's inflation data, emphasizing the need to assess the potential extent of repricing in U.S. interest rate markets based on the CPI figures.

A strategist from Citigroup suggested that the market has become overly complacent regarding the U.S. inflation outlook, making trades that bet on rising price pressures appear attractive. He emphasized that investors may be underestimating the resilience of the U.S. consumer, and market expectations for inflation might require a slight upward revision.

The strategist stated in an interview that while the market seems convinced that inflation will decline, the economy remains in a structurally higher inflation environment.