US stocks saw modest gains following the release of cooler-than-expected producer inflation data, which helped to ease concerns about rising prices. The data, released on Tuesday, revealed that wholesale inflation increased by only 0.2% in December on a monthly basis, much lower than the anticipated 0.4% rise. On a year-over-year basis, the producer price index (PPI) climbed 3.3%, which was also below the expected 3.5% increase.
This news provided relief to investors, who have been closely watching inflation trends for signs of a slowdown. As the inflationary pressures appear to cool, market sentiment improved, with investors turning their attention to the upcoming consumer price index (CPI) report due Wednesday.
Market Focus Shifts to CPI Data
Chris Brigati, chief investment officer at SWBC, emphasized that all eyes are now on Wednesday’s CPI report. This reading is expected to be one of the most important inflation updates in recent memory, potentially shaping the Federal Reserve’s policy direction. A stronger-than-expected inflation number could reinforce the outlook for no interest rate cuts in 2025 and even raise concerns about potential rate hikes. On the other hand, weaker inflation data may help to ease fears over the Fed’s future actions.
Earnings Season Begins
In addition to inflation data, investors are also gearing up for the start of the fourth-quarter earnings season. Major US banks, including JPMorgan Chase and Wells Fargo, are set to report their quarterly results on Wednesday. Analysts expect continued strength in trading and investment banking, although concerns about slower loan demand and higher deposit costs may impact overall earnings.
Conclusion
With the market focused on inflation trends and the upcoming earnings reports, there is a cautious optimism in the air. The cooling producer inflation data has provided some relief, but all eyes will be on the CPI report and earnings results for further indications of the economy’s direction and the Federal Reserve’s policy stance.
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