(Bloomberg) — Stocks wobbled throughout the day, with traders reluctant to make any significant bets as they awaited key inflation data for clues on the Federal Reserve’s rate path.
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As the consumer price index closed after several swings, the S&P 500 rose 0.1%. As most stocks rallied, big tech came under pressure again. Options traders are cheering for the busiest CPI date since March 2023 for the US equity benchmark. The index is expected to move 1% in either direction on Jan. 15, depending on costs and calls on the money, Stewart Kaiser said. By Citigroup Inc.
“All eyes are now on Wednesday’s CPI report, which may be the most important inflation measure in recent memory, as it adds to the market’s Fed-obsessing sentiment,” said Chris Brigati at SWBC. “A strong inflation number adds to the idea of no rate cuts and even no rate hikes in 2025, while a weak inflation data point could help calm the market’s Fed concerns.”
Data showed on Tuesday that the producer price index unexpectedly fell in December, helped by lower food costs and prices of flat services. However, several of the components that feed into the Fed’s preferred inflation measure – a measure of personal consumption expenditures – were mixed in December.
“This means the Fed and markets will not benefit from particularly healthy PPI inputs as they did in November,” said Krishna Guha at Evercore. “In the very near term, this leaves markets (in both directions) vulnerable to Wednesday’s CPI report.”
The S&P 500 closed above its 100-day moving average after briefly breaking below. The Nasdaq 100 fell 0.1%. The Dow Jones Industrial Average rose 0.5%. The “Magnificent Seven” megacaps gauge slipped 1%. Russell 2000 small companies gained 1.1%. Homebuilders jumped after KB Home’s earnings hit. Eli Lilly & Co. fell 6.6 percent amid disappointing sales.
The 10-year Treasury yield was little changed at 4.78 percent. The dollar fell after Bloomberg News reported that Donald Trump’s economic team is considering gradual tariff increases, which would help keep inflation at bay.
Oil fell from a five-month high after Hamas and Israel reached a temporary ceasefire, easing a rally sparked by threats to supplies from Russia and Iran.
Underlying US inflation is likely to moderate only a touch in late 2024 against a backdrop of a strong labor market and a firm economy, supporting the Fed’s slower pace of rate cuts.
According to the median forecast in a Bloomberg survey of economists, the consumer price index excluding food and energy rose 0.2% in December after four consecutive months of 0.3% gains. Core CPI, a better snapshot of underlying inflation, rose 3.3% from a year ago – matching readings from the previous three months.
A survey by 22V Research found that 47% of investors expect the market’s reaction to CPI to be “risk-off”, 29% think it is “risky” and 24% say it is “mixed/neutral”. According to the survey, 53% of respondents believe that financial conditions should be tightened.
“High interest rates or some tightening of financial conditions seems necessary for the US economy to achieve “macro balance” (core PCE close to 2% and full employment) Dennis deBusschere at 22V.
Wall Street is gearing up for an unannounced start to the earnings season on Wednesday with earnings from major banks.
JPMorgan Chase & Co. And lenders including Wells Fargo & Co. are expected to show continued gains from commercial and investment banking, which helped offset a decline in net interest income due to higher deposits and deferred loan demand.
“When it comes to big bank earnings, net interest income is the key data point to look at,” Brigati said at SWBC. “If banks are able to borrow at cheaper rates with their loan portfolios, that’s a constructive sign for the year ahead.”
Corporate Highlights:
Southwest Airlines is halting a new round of cost-cutting for management, headquarters jobs and foreign hires amid a spat with activist Elliott Investment Management.
According to an internal memo sent to all employees, MetaPlatforms Inc. MetaPlatforms is cutting 5% of its workforce through performance-based terminations and plans to hire new people to fill their positions this year.
CVS Health Corp., Cigna Group Inc. and UnitedHealth Group Inc. units paid significantly more than the national average purchase price for dozens of specialty generic drugs, generating more than $7.3 billion in “excessive” revenue over six years, the Federal Trade Commission said. In a report on drug brokers.
B. Riley Financial Inc. has received more information from federal regulators about its relationship with the now-bankrupt franchise group, as well as personal loans to co-founder and chairman Bryant Riley.
Capital One Financial Corp. misled customers when it offered a new savings account with a higher interest rate and didn’t offer it to existing savings accounts, the Consumer Financial Protection Bureau said in a lawsuit filed against the bank on Tuesday.
United Rentals Inc. It agreed to buy H&E Equipment Services Inc. for $3.4 billion, acquiring equipment for the construction and industrial markets.
Country Garden Holdings Co. suffered another record loss in 2023 as one of China’s biggest developers continues a lengthy restructuring process after defaulting on debt.
Key events this week:
Eurozone industrial production, Wednesday
Citigroup, JPMorgan, Goldman Sachs, Bank of New York Mellon, Wells Fargo and BlackRock earnings, Wednesday
US CPI, Empire Manufacturing, Wed
The Fed’s John Williams, Tom Bark, Austin Golsbe and Neil Kashkari speak, Wednesday.
TSMC earnings, Thursday
The ECB will hold its December policy meeting on Thursday.
Bank of America, Morgan Stanley earnings, Thursday
US Initial Jobless Claims, Retail Sales, Import Prices, Thursday
China GDP, Property Prices, Retail Sales, Industrial Production, Fri
Eurozone CPI, Fri
US housing starts, industrial production, Friday
Some of the major activities in the markets are-
Shares
The S&P 500 was up 0.1 percent by 4 p.m. New York time.
The Nasdaq 100 fell 0.1%
The Dow Jones industrial average rose 0.5 percent.
The MSCI world index increased by 0.2 percent
The Bloomberg Magma 7 Total Return Index fell 1%
The Russell 2000 index rose 1.1 percent.
Currencies
The Bloomberg Dollar Spot Index was down 0.4 percent.
The euro rose 0.6 percent to $1.0302.
The British pound was little changed at $1.2206.
The Japanese yen fell 0.3 percent to 157.97 per dollar.
Crypto currencies
Bitcoin rose 2.5% to 96,500.95
Ether rose 3.3% to 3,217.58
Bonds
The 10-year Treasury yield was little changed at 4.78%
Germany’s 10-year yield rose four basis points to 2.65%.
Britain’s 10-year yield was little changed at 4.89%
Goods
West Texas Intermediate crude fell 1.3 percent to $77.82 a barrel.
Spot gold rose 0.5% to $2,676.38 an ounce.
This story was produced with the help of Bloomberg Automation.
–With assistance from Sujata Rao, Julien Pontus, Margarita Kirakosian, and Aya Wagatauma.
