(Bloomberg) -- Stocks rebounded throughout the day, with traders reluctant to make any big bets as they await key inflation data for clues on the direction of Federal Reserve interest rates.
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After several twists and turns in the consumer price index, the S&P 500 finally rose 0.1%. While most stocks rose, Big Tech stocks came under pressure again. Options traders are bracing for the U.S. equity benchmark's busiest CPI day since March 2023. The index is expected to move 1% in either direction on Jan. 15, based on the cost of at-the-money puts and calls, Stuart Kaiser said at Citigroup
“All eyes are now on Wednesday’s CPI report, which may be the most important inflation data in recent memory as it will add to the market’s obsession with the Fed,” said SWBC’s Chris Brigati. “Strong The weak inflation data may help calm market concerns about the Federal Reserve."
Data on Tuesday showed producer prices unexpectedly cooled in December, helped by lower food costs and flat service prices. However, several components of the Fed's preferred inflation gauge, a measure of personal consumption expenditures, actually performed mixedly in December.
“This means the Fed and markets will not benefit from particularly benign PPI inputs to PCE as they did in November,” Evercore’s Krishna Guha said. “In the short term, this will keep the market (both ways) affected by Wednesday’s consumer price index. Reporting Impact.”
The S&P 500 closed above its 100-day moving average after briefly falling below it. The Nasdaq 100 fell 0.1%. The Dow Jones Industrial Average rose 0.5%. An index of the "big seven" megacap stocks fell 1%. The Russell 2000 index of small businesses rose 1.1%. Homebuilder shares rose after KB Home reported better-than-expected earnings. Eli Lilly & Co. shares fell 6.6% on disappointing sales.
The 10-year Treasury yield was little changed at 4.78%. The dollar fell after Bloomberg News reported that Donald Trump's incoming economic team is considering gradually increasing tariffs to help avoid a spike in inflation.
Oil prices retreated from five-month highs as Hamas and Israel tentatively agreed to a ceasefire, cooling gains driven by supply risks from Russia and Iran.
Against the backdrop of a resilient job market and a stable economy, underlying U.S. inflation is likely to cool only slightly in late 2024, supporting the Federal Reserve's slow approach to further interest rate cuts.
The consumer price index, which excludes food and energy, is expected to rise 0.2% in December after rising 0.3% for four straight months, according to the median forecast in a Bloomberg survey of economists. The core consumer price index (CPI), a better reflection of underlying inflation, is expected to rise 3.3% from a year ago, in line with data from the previous three months.
A survey conducted by 22V Research showed that 47% of investors expected the market reaction to CPI to be "risk aversion", 29% said it was "risk on" and 24% said it was "mixed/negligible" Don’t count”. The survey also showed that 53% of respondents believed that financial conditions need to be tightened.
"The U.S. economy appears to need either higher interest rates or tighter financial conditions to achieve 'macro balance' (core PCE near 2% and full employment)," says 22V's Dennis DeBusschere.
Wall Street is also gearing up for the unofficial start of earnings season, with the big banks reporting on Wednesday.
Banks such as JPMorgan Chase & Co. and Wells Fargo & Co. are expected to continue to generate gains from trading and investment banking, which will help offset a decline in net interest income from rising deposits and sluggish loan demand.
“When it comes to big bank earnings, net interest income is a key data point to watch,” SWBC’s Brigatti said. “If a bank can borrow at a cheaper rate than its loan portfolio, that’s a good bet for the coming year. A constructive sign.”
Company Highlights:
Southwest Airlines Co. is pausing hiring for management, headquarters positions and outside employees as it implements a new round of cost cuts following a dispute with activist shareholder Elliott Investment Management.
Meta Platforms Inc. will lay off about 5% of its workforce through performance-based layoffs and plans to hire new employees to fill their positions this year, according to an internal memo sent to all employees.
The FTC said subsidiaries of CVS Health Corp., Cigna Group and UnitedHealth Group Inc. charged far more than the national average purchase cost for dozens of specialty generic drugs, bringing in more than $7.3 billion over six years. of 'excess' earnings in a report on drug middlemen.
Federal regulators are demanding more information from B. Riley Financial Inc., seeking information about its dealings with the now-bankrupt Franchise Group and personal loans to co-founder and Chairman Bryant Riley.
Capital One Financial Co. misled customers when it launched new savings accounts with higher interest rates but did not offer higher rates on existing savings accounts, the U.S. Consumer Financial Protection Bureau said Tuesday in a lawsuit against the bank.
United Rentals Inc. agreed to acquire H&E Equipment Services Inc. for $3.4 billion in cash, acquiring a portfolio of equipment serving the construction and industrial markets.
Country Garden Holdings Ltd. suffered another record loss in 2023 as one of China's largest developers continues a lengthy restructuring process after defaulting on its debt.
Main events this week:
Eurozone industrial production on Wednesday
Citigroup, JPMorgan Chase, Goldman Sachs, Bank of New York Mellon, Wells Fargo and BlackRock report earnings on Wednesday
US CPI, Empire State Manufacturing, Wednesday
Fed's John Williams, Tom Barkin, Austen Goolsby and Neel Kashkari speak on Wednesday
TSMC reports earnings on Thursday
The European Central Bank releases minutes of its December policy meeting on Thursday
Bank of America and Morgan Stanley report earnings on Thursday
U.S. jobless claims, retail sales, import prices, Thursday
China Friday GDP, real estate prices, retail sales, industrial production
Eurozone consumer price index on Friday
U.S. housing starts, industrial production on Friday
Some major trends in the market:
stock
The S&P 500 rose 0.1% as of 4 p.m. New York time
The Nasdaq 100 fell 0.1%
The Dow Jones Industrial Average rose 0.5%
MSCI World Index rose 0.2%
Bloomberg Magnificent 7 Total Return Index fell 1%
Russell 2000 index rose 1.1%
currency
The Bloomberg Dollar Spot Index fell 0.4%
Euro rises 0.6% to $1.0302
GBP/USD was little changed at $1.2206
The yen fell 0.3% to 157.97 against the dollar
cryptocurrency
Bitcoin rises 2.5% to $96,500.95
Ethereum rises 3.3% to $3,217.58
bonds
The 10-year Treasury bond yield was little changed at 4.78%
German 10-year government bond yields rose 4 basis points to 2.65%
The UK 10-year government bond yield was little changed at 4.89%
commodity
West Texas Intermediate crude fell 1.3% to $77.82 a barrel
Spot gold rose 0.5% to $2,676.38 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Sujata Rao, Julien Ponthus, Margaryta Kirakosian and Aya Wagatsuma.
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