Market Anticipation Builds Ahead of Key Inflation Data
As traders await the crucial consumer price index (CPI) report, the stock market experienced a day of volatility, with the S&P 500 ultimately closing 0.1% higher. The uncertainty surrounding the Federal Reserve’s rate decisions has created a sense of unease, with big tech stocks coming under pressure.
Eyes on the CPI Report
The CPI report, set to be released on January 15, is expected to be a pivotal moment in shaping the market’s sentiment. According to Stuart Kaiser at Citigroup Inc., options traders are bracing for a potentially significant move in the S&P 500, with the index expected to shift 1% in either direction. Chris Brigati at SWBC notes that a strong inflation reading could fuel concerns about rate hikes, while a weak reading might calm market fears.
Mixed Signals from Producer Price Index
Tuesday’s producer price index (PPI) data showed an unexpected cooling in December, driven by a decline in food costs and flat services prices. However, components that feed into the Fed’s preferred inflation measure, the personal consumption expenditures gauge, were mixed in December. This leaves markets exposed to potential surprises from the CPI report, according to Krishna Guha at Evercore.
Market Performance
The S&P 500 closed above its 100-day moving average, while the Nasdaq 100 fell 0.1%. The Dow Jones Industrial Average added 0.5%, and the Russell 2000 of small firms gained 1.1%. Homebuilders surged after KB Home’s earnings beat, while Eli Lilly & Co. sank 6.6% amid disappointing sales.
Earnings Season Ahead
Wall Street is gearing up for the unofficial start of earnings season, with results from big banks expected to show continued gains from trading and investment banking. Lenders, including JPMorgan Chase & Co. and Wells Fargo & Co., will be closely watched for signs of net interest income growth.
Corporate Highlights
Southwest Airlines Co. is pausing hiring for certain positions in a new round of cost cuts. Meta Platforms Inc. is cutting roughly 5% of its staff through performance-based terminations. Units of CVS Health Corp., Cigna Group, and UnitedHealth Group Inc. were found to have charged significantly more than the national average acquisition cost for dozens of specialty generic drugs. B. Riley Financial Inc. received more demands for information from federal regulators about its dealings with now-bankrupt Franchise Group.
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)
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