Markets hesitate after light inflation report

Dow fell 70, but advancers over decliners 5-2 & NAZ was off 79.  The MLP index was higher again, up 5+ to 410, & the REIT index added 2+ to 390.  Junk bond funds saw a little more selling & Treasuries crawled higher, reducing yields slightly (more below).  Oil pulled back almost 1 to 78 & gold recovered 8 to 2686.

Dow Jones Industrials

US producer prices increased moderately in Dec, but that is unlikely to change views that the Federal Reserve would not cut interest rates again before the 2nd ½ of this year amid labor market resilience.  The producer price index (PPI) for final demand rose 0.2% last month after an unrevised 0.4% advance in Nov, the Labor Dept's Bureau of Labor Statistics said.  The forecast called for the PPI climbing 0.3%.  In the 12 months thru Dec, the PPI accelerated 3.3% after increasing 3.0% in Nov.  The surge in the year-on-year rate reflected last year's lower prices, especially for energy products, dropping out of the calculation.  The report followed news last week of a sharp rise in nonfarm payrolls in Dec & decline in the unemployment rate, which led economists to expect that the central bank would keep rates unchanged through Jun.  Bank of America Securities believes the Fed's easing cycle is over.  Goldman Sachs now expects 2 cuts this year in Jun & Dec, revised down from 3 previously.  The central bank kicked off its easing cycle in Sep & has lowered its benchmark overnight interest rate by 100 basis points to 4.50%-4.75%.  The last reduction was in Dec when policymakers also projected 2 rate cuts this year instead of the 4 they had forecast in Sep.  The policy rate was hiked by 5.25 percentage points in 2022 & 2023 to tame inflation.  Fears are escalating that pledges by Pres-elect Trump to impose or massively raise tariffs on imports & deport Ms of undocumented immigrants could stoke inflation.  That was evident in the spike in consumers' inflation expectations in Jan.

US producer prices rise moderately in December

Treasury yields pulled back as wholesale prices rose less than expected in Dec.  The 10-year yield fell around 2 basis points to 4.786% after hitting a fresh 14-month high in the previous session & the 2-year Treasury yield was about 3 basis points lower at 4.373%.  One basis point is equal to 0.01% & yields & prices move in opposite directions.  The decline yields came amid a lighter-than-expected inflation reading ahead of tomorrow's consumer price index.  US bond yields spiked last week, after a hotter-than-expected jobs report fueled expectations for a slow pace of Federal Reserve cuts.  The central bank next meets from Jan 28-29 & markets have priced in a more than 97% probability of a rate hold.

10-year Treasury yield eases slightly as first of two key inflation reports comes in light

Tesla (TSLA) stock popped on the heels of promising global electric vehicle sales data & media reports indicating Chinese authorities could allow the EV giant's CEO Elon Musk to buy the US operations of social media platform TikTok.  The sale would be part of a contingency plan as a deadline approaches for the platform owned by Chinese parent company ByteDance to either divest or face a US ban.  A report said that Chinese officials have discussed the option of selling TikTok's US unit to Musk, who is also the CEO of X, formally known as Twitter.  Although sales slowed for a 2nd consecutive month, 2024 proved to be a record year with 17.1M units sold.  Traders have been taking note of Elon Musk's reach across a variety of companies & data collection spanning across everything from electric vehicles & satellites to social media.  The stock rose 5.15.

Tesla pops on encouraging EV data, Musk's possible TikTok buy

Stocks have been wavering.  Investors have been watching inflation reports closely, including the cool Dec PPI report above, to try to figure out when the Federal Reserve may resume cutting rates.  Dow is back to where it was in early Nov.