U.S. stocks rose, as investors looked ahead to Thursday’s inflation data and considered the trajectory of interest rates.
The S&P 500 ticked up 0.5% in early New York trading. The Dow Jones Industrial Average and the technology-focused Nasdaq Composite Index both advanced 0.4%.
Investors’ attention for the remainder of this week will likely be focused on December inflation data, which the Labor Department will release Thursday. Economists surveyed by The Wall Street Journal expect consumer prices to have risen 6.5% on an annual basis, down from 7.1% a month earlier.
Money managers say they are bracing for potentially volatile trading after the data —CPI days in recent months have sparked big swings in stocks. A comedown in headline inflation will be an encouraging sign for investors, though many will also be focused on so-called core inflation, which excludes volatile food and energy prices and is considered a better indicator of underlying pricing pressures.
Markets have “been relatively quiet over the last 24 hours as we await [Thursday’s] all important U.S. CPI print,” said Jim Reid, a
strategist, in a Wednesday note.
Thursday’s inflation data will factor heavily into the Federal Reserve’s next monetary policy meeting, which kicks off Jan. 31.
Federal-funds futures, used by traders to wager on the course of interest rates, showed Wednesday morning a 77% chance that the central bank raises rates by 0.25 percentage point, according to CME Group. That would be a slowdown from last month’s 0.5-percentage point increase and mark its smallest rate increase since March.
Central bankers have so far indicated that they aren’t yet finished with interest-rate increases. Fed Chair
said Tuesday the central bank remains committed to lowering inflation by restraining economic growth.
“This is possibly the most well-telegraphed recession in a very long time,” said
global macro strategist at Vanda Research. He said sentiment surveys point to continued pessimism among investors. Still, he added, if Thursday’s inflation data shows a continued decline, it “could be enough to convince [some investors] that the worst is over.”
Fourth-quarter results, which kick off in earnest this week, also remain top of mind for investors. Overall, analysts expect S&P 500 companies to report their first year-over-year decline in quarterly earnings since the height of the Covid-19 pandemic in 2020, according to FactSet.
With 2022 in the rear-view mirror, investors will also be carefully focused on the profit outlook for the coming year,
strategists led by David Kostin said in a note published last week.
jumped 25%, extending a streak of wild trading for the stock. The retailer said Tuesday it is planning more layoffs and cost cuts after sales continued to fall.
In the government bond market, yields ticked down. The yield on the benchmark 10-year U.S. Treasury note fell to 3.579%, from 3.618% Tuesday. Yields fall when bond prices rise.
The WSJ Dollar Index ticked up less than 0.1%, following Tuesday’s gains.
Oil advanced, with Brent crude, the international benchmark, rising 2% to $81.73 a barrel, boosted by optimism over China’s reopening. Copper prices also gained, hitting their highest level since mid-2022.
In Europe, stock indexes rose, extending their recent outperformance over the U.S. The pan-continental Stoxx Europe 600 gained 0.5%. In the U.K., the FTSE 100 added 0.9%, putting it less than 2% away from reaching a new record close.
Indexes in Asia were mixed. Hong Kong’s Hang Seng gained 0.5%. In mainland China, the Shanghai Composite lost 0.2%. Japan’s Nikkei 225 rose 1%.
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