Market Volatility Continues as Investors Await Critical Inflation Reports
US stocks closed mixed on Tuesday, as investors digested the first of two key inflation reports this week. The Producer Price Index (PPI) showed prices rose less than expected in December, calming some fears of a US inflation resurgence. Meanwhile, a report suggested that the incoming Trump administration could hike tariffs more gradually to ease inflationary pressures.
Inflation Concerns Persist
The PPI rose 3.3% over last year, up from 3% in November but less than economists expected. It rose 0.2% over the previous month, also less than expected. The report sets the stage for Wednesday’s heavily anticipated Consumer Price Index (CPI) print. Economists expect headline inflation of 2.9%, an uptick from November’s 2.7% annual gain in prices.
Tariff Uncertainty Looms
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 could help prevent inflation spikes, but gradual tariffs could still be “problematic” for the Federal Reserve’s efforts to cool inflation.
Market Reaction
The benchmark S&P 500 finished the trading day about 0.1% higher, while the tech-heavy Nasdaq Composite dropped around 0.2%. The Dow Jones Industrial Average moved roughly 0.5% higher to cap off back-to-back winning days for the blue-chip index. The dollar retreated after a five-day winning streak, while the 10-year Treasury yield continued to hover around 14-month highs.
Bitcoin and Quantum Computing Stocks Rebound
Bitcoin edged higher on Tuesday, looking to stage a comeback after prices have fallen roughly 4% over the past month. Smaller cryptocurrencies like ethereum also rose in tandem. Meanwhile, quantum computing stocks rebounded Tuesday afternoon following a massive sell-off spurred by Big Tech CEOs questioning the technology’s long-term potential.
Earnings and Economic Data
JPMorgan Chase elevated Jennifer Piepszak to COO as part of a new management reshuffle announced Tuesday. The bank is expected to set another record for highest full-year profits in US banking history when it reports earnings Wednesday morning. KB Home rose 4% on Tuesday after posting better-than-expected earnings per share and net orders despite elevated mortgage rates.
What’s Ahead
Investors will now turn their attention to Wednesday’s critical CPI report, set for release at 8:30 a.m. ET. The report will serve as the latest test of whether an inflation resurgence is a risk to the US economy as investors debate if and when the Federal Reserve will cut interest rates in 2025.
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