Bond yields plunge, stocks near flat, focus on inflation, Trump
By Carolyn Valetkiewicz and Harry Robertson
NEW YORK/LONDON (Reuters) – U.S. Treasury yields rose on Tuesday after data showed U.S. producer prices rose less than expected in December, while stock indexes were cautious on Wednesday ahead of U.S. consumer price data and President-elect Donald Trump’s inauguration next week.
The US producer price index rose 0.2% on the month in December, below expectations for a 0.3% increase and a 0.4% decline in November.
Investors are worried about the continued rise in US inflation. The PPI report did not change the view that the Federal Reserve will not cut interest rates again before the second half of this year, and investors are still waiting for the more closely watched US consumer price index report, which is due on Wednesday.
CPI data showed month-on-month inflation held at 0.3% in December and the year-on-year figure rose to 2.9%, up from 2.7% in November.
Tariffs that could boost inflation have been hanging over the market since Trump took office.
Most stock indexes were higher following the PPI report, but the S&P 500 and Nasdaq lost gains late in the US morning.
“There’s a lot of concern about the Trump platform and inflation, both in terms of tariffs and tax cuts,” said Rick Meckler, a partner at Cherry Lane Investments in the New Vernon family investment office. New Jersey
Bloomberg reported that Trump aides were weighing proposals, including raising tariffs by 2 to 5 percent a month, to boost U.S. interests and curb inflation.
The Dow Jones Industrial Average was down 42.61 points, or 0.10%, to 42,339.90, the S&P 500 was down 8.42 points, or 0.15%, to 5,827.34 and the Nasdaq Composite was down 40.25 points, or 0.18%, to 7,827.00.
MSCI’s broadest index of shares worldwide rose 1.19 points, or 0.14 percent, to 832.98. The STOXX 600 index fell by 0.11%.
US fourth-quarter 2024 earnings are expected to increase this week, thanks to results from some of the largest US banks. Lenders are expected to report strong earnings, fueled by strong trading and marketing.
The benchmark 10-year Treasury note edged lower but held to a 14-month high.
After hitting 4.805% overnight, it fell slightly to 4.790%, its highest since November 2023.
Higher yields have weighed on stocks, making bonds relatively more attractive and raising the cost of borrowing for companies. The Russell 2000 index of small-cap U.S. stocks is down 11 percent from its peak in November.
