Market Optimism Returns as Inflation Fears Ease
US stock futures surged across the board on Tuesday, driven by a positive inflation report and rumors of a more gradual tariff hike approach by the incoming Trump administration. The S&P 500 futures jumped 0.5%, while the tech-heavy Nasdaq 100 futures rose 0.7%, both rebounding from Monday’s losses. Dow Jones Industrial Average futures also added 0.3%, building on the blue-chip index’s winning day.
Inflation Report Brings Relief
The Producer Price Index (PPI), which tracks wholesale price changes, rose 3.3% over the past year, up from 3% in November but below economists’ expectations. The monthly increase was also lower than expected, at 0.2%. This report sets the stage for Wednesday’s highly anticipated consumer inflation print.
Tariff Hike Approach May Ease Inflation Concerns
President-elect Donald Trump’s team is considering a month-by-month rollout of promised tariff increases, rather than imposing higher levels in a single move. This approach aims to prevent inflation spikes, which have been worrying markets. While gradual tariffs may still pose challenges for the Federal Reserve’s efforts to cool inflation, it’s a more palatable solution than sudden hikes.
Market Reaction
The dollar retreated after a five-day winning streak, while the 10-year Treasury yield pulled back from 14-month highs. Shares of KB Home surged almost 10% in pre-market trading after the home builder’s fourth-quarter earnings beat estimates.
Economic Data and Earnings
Tuesday’s economic data included the NFIB small business optimism report for December and the Producer Price Index. There were no notable earnings reports.
Other Market News
BlackRock is working to avoid scrutiny as the GOP takes power, while Biden is set to issue an executive order to ensure power for AI data centers. The Trump team is also exploring ways to “save” TikTok, with Elon Musk as a potential rescuer. Starbucks has limited the use of its cafes and bathrooms to paying customers. Meanwhile, Goldman Sachs estimates that insured losses from the Eaton and Palisades fires could reach $10 billion to $30 billion, with significant near-term economic implications.
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