Dow pops, Nasdaq slips as focus turns to CPI inflation report.

Wholesale prices rose less than expected in December, calming concerns that US inflation is reviving.

Raymond James Chief Economist Eugenio Alleman said in response to the report that “PPI will be more positive than expected in December for markets, which have been concerned by the high inflation readings over the past several months.”

Excluding the volatile food and energy categories, the index did not show a rise in producer prices last month – a sign of some relief ahead of Wednesday’s key consumer inflation report.

“Weakness was across most sectors except energy, where we saw gasoline prices rise last month and some strength in airline prices,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Energy prices rose 3.5% in November, the biggest monthly increase since February 2024. Domestic and international airline fares increased by 7.2% during the month. Airlines feed directly into the Fed’s preferred core PCE inflation measure, which is set to be released later this month.

“We’re expecting broader results on the latest consumer price data after it’s released tomorrow,” Ripley said.

December consumer prices are expected to remain flat, with the core CPI expected to rise 3.3% annually for the fifth consecutive month. Tariff uncertainty remains a key question for the rest of the year.

“The proposed tariff hike by the incoming administration is adding to inflation,” said Seema Shah, chief global strategist at Prime Asset Management.

“Estimates range from 0.5% to 1.5% of inflation-adjusted rates. Of course, central banks typically look at a one-time increase in rates – unless it leads to an increase in inflation. Choices, both market-based and survey-based, are based on one- and two-year rates.” Inflation measures increased slightly.

Therefore, in Shah’s view, “the Fed cannot afford to ignore the inflationary risks facing the US economy”.

“Recent economic strength, combined with rising tariff concerns, will increase inflationary pressures.”