The U.S. stock market may encounter some downward pressure this morning, after selling off late last week. As we were publishing this update, the S&P 500 Index futures were down about 40 points (-0.70%) in early-morning trading, with the 10-year Treasury yield now hitting the 4.8% level.
This week, investors will receive a couple of key inflation readings, as well as the first batch of fourth-quarter earnings reports.
There are no major economic items scheduled for today. However, tomorrow the Producer Price Index (PPI) for December will be released, along with the Federal Reserve’s Beige Book report. On Wednesday, the Consumer Price Index (CPI) will be published, and this item should be closely scrutinized by investors. Analysts currently expect the numbers to show that consumer prices rose roughly 2.9% in December, on a year-over-year basis. This reading would suggest that the rate of inflation, while well below the level reached a couple of years ago, may still need to be watched. It should be noted that the Federal Open Market Committee (FOMC) is slated to meet at the end of this month, so any suggestion that prices are moving higher may cause some volatility. Few investors think that the Fed will lower rates at this juncture, especially after the strong December employment report. Also this Thursday, we will get a look at the monthly retail sales figures, and a strong reading here could lift sentiment.
The fourth-quarter earnings season is slated to kick off at the end of the week. As is usually the case, the banks and financial institutions will be at the top of the lineup. Specifically, we will receive reports from JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), and BlackRock (BLK). Although this is a limited sample, some favorable reports and encouraging guidance could provide support for the market.
The stock market started to weaken at the close of 2024, and has not yet regained its stride. Recent selling has pushed the S&P 500 Index below its 50-day moving average (located at the 5,950 area). For perspective, stocks are currently down about 5% from the high point reached a few weeks ago. It is not clear if stocks will find support near this level, or if another move lower will materialize. Meanwhile, equity valuations still seem somewhat elevated and bond yields are starting to rise, so some volatility should be expected. –Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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