(Bloomberg) -- Stocks rose as a surprise slowdown in wholesale inflation brought a degree of relief to investors bracing for Wednesday’s key consumer price index.
A rebound in equities followed a slide that sent the S&P 500 to the lowest level since election day. The bond market continued to show signs of stabilization after a recent surge in yields that was triggered by bets the Federal Reserve would have less room to cut interest rates this year amid sticky inflation.
Options traders are bracing for the S&P 500’s busiest CPI day since March 2023, hoping the figures will offer more clarity on future policy easing. The S&P 500 is expected to move 1% in either direction on Jan. 15, based on the cost of at-the-money puts and calls, according to Stuart Kaiser at Citigroup Inc.
“All eyes are now on Wednesday’s CPI report, which may be the most important inflation reading in recent memory, as it will fuel the market’s Fed-obsessed sentiment,” said Chris Brigati at SWBC. “A strong inflation number adds to this idea of no cuts in 2025, and potentially even a rate hike, while a weak inflation data point may help to calm the market’s Fed fears.”
The S&P 500 rose 0.3%. The Nasdaq 100 climbed 0.4%. The Dow Jones Industrial Average added 0.2%.
The yield on 10-year Treasuries advanced one basis point to 4.79%. The Bloomberg Dollar Spot Index fell 0.2%. Oil slipped from a five-month high amid progress in ceasefire talks between Hamas and Israel.
US wholesale inflation unexpectedly cooled in December, helped by a drop in food costs and and flat services prices that may help temper concerns of lingering price pressures.
The producer price index for final demand rose 0.2% from a month earlier. The median forecast in a Bloomberg survey of economists called for a 0.4% gain. A measure excluding food and energy was unchanged from November.
“While the wholesale price data does not necessarily translate directly into consumer price data, it was encouraging to see the PPI Index come in well below expectations,” said Charlie Ripley at Allianz Investment Management. “Market reaction in the bond market was relatively muted, but we are expecting a wider range of outcomes following tomorrow’s release on the latest consumer price data.”
To Ian Lyngen at BMO Capital Markets, the theme in the Treasury market will be one of consolidation, and he says he’d be wary of a grind marginally higher in yields in the absence of any other tradable events.
Corporate Highlights:
Eli Lilly & Co. reported preliminary fourth-quarter revenue that missed analyst estimates on lower-than-expected sales of its weight-loss and diabetes shots.
KB Home reported earnings, revenue and deliveries for the fourth quarter that beat consensus estimates.
Southwest Airlines Co. is pausing hiring for management, headquarters jobs and outside workers in a new round of cost cuts following a fight with activist shareholder Elliott Investment Management.
B. Riley Financial Inc. received more demands for information from federal regulators about its dealings with now-bankrupt Franchise Group as well as a personal loan for Chairman and co-founder Bryant Riley.
Capital One Financial Corp. misled customers when it rolled out a new savings account with a higher interest rate it didn’t also give to existing savings accounts, the Consumer Financial Protection Bureau said Tuesday in a lawsuit against the bank.
United Rentals Inc. agreed to buy H&E Equipment Services Inc. for $3.4 billion in cash, gaining a fleet of equipment to serve construction and industrial markets.
Signet Jewelers Ltd.’s shares plunged on Tuesday after a disappointing holiday season prompted the retailer to cut its sales guidance.
Country Garden Holdings Co. suffered another record loss in 2023 as one of China’s largest developers continues its lengthy restructuring process after defaulting on its 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, Wednesday
Fed’s John Williams, Tom Barkin, Austan Goolsbee and Neel Kashkari speak, Wednesday
TSMC earnings, Thursday
ECB releases account of December policy meeting, 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, Friday
Eurozone CPI, Friday
US housing starts, industrial production, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.3% as of 9:53 a.m. New York time
The Nasdaq 100 rose 0.4%
The Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 was little changed
The MSCI World Index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.0266
The British pound fell 0.4% to $1.2157
The Japanese yen fell 0.2% to 157.76 per dollar
Cryptocurrencies
Bitcoin rose 2.6% to $96,596.51
Ether rose 2.7% to $3,199.75
Bonds
The yield on 10-year Treasuries advanced one basis point to 4.79%
Germany’s 10-year yield advanced two basis points to 2.64%
Britain’s 10-year yield was little changed at 4.88%
Commodities
West Texas Intermediate crude fell 0.9% to $78.12 a barrel
Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Sujata Rao, Julien Ponthus, Margaryta Kirakosian and Aya Wagatsuma.
