The U.S. futures markets were trading well in the green this morning ahead of the release of inflation data, as the market benefited from strong results from a few large banks. These included positive earnings growth from JPMorgan Chase (JPM), which reached record levels, while shares of Wells Fargo (WFC) increased thanks to higher net interest income. Goldman Sachs (GS) posted stronger earnings based on its investment banking and other activities. Traders generally bought these stocks, and the futures market drifted higher as a whole.
The consumer price index (CPI) was then released in Washington, showing that prices increased 0.4% in the month of December, 2024, or 2.9% annualized. Notably, when excluding food and energy, which tend to be more volatile, “core” prices increased 0.2% in December, or 3.2% annualized. The latter is a key input for the Federal Reserve in its monetary and interest-rate policy decisions. This outcome showed a slowing of inflationary pressures, and traders believe this result will motivate the Fed to become more accommodative in its monetary policy. Overall, the market took these figures as a positive and continued to bid up stocks, suggesting a strong start to the trading day.
The stock market started positively yesterday, but traded around the breakeven level for much of the day. Traders were awaiting today’s inflationary data and did not want to take large positions. Overall, the S&P 500 rose seven points (up 0.11%) and the Dow Jones Industrial Average increased 221 points (up 0.52%). However, the NASDAQ finished in the red, declining 44 points (down 0.23%). Moreover, market breadth was rather positive, with advancers outpacing decliners by a 3.2-to-1.0 ratio. Utility equities were among the best performers on the day, while healthcare stocks were among the weakest.
In commodity news, oil prices trended sideways yesterday as the U.S. implemented more sanctions on Russian oil by targeting individual oil tanker ships. This was generally offset by improving sentiment that a de-escalation of the conflict in the Middle East may be announced with a ceasefire deal between Hamas and Israel. Elsewhere, U.S. Treasury bond yields had little direction yesterday, ahead of new inflationary data in the CPI report. The Chicago Board Options Exchange Volatility Index, or VIX, was down slightly as traders bought less options protection.
Several economic reports will be released in the coming days. These include initial jobless claims, U.S. retail sales for December, the Philadelphia Fed manufacturing survey for January, and Homebuilder confidence for January on Thursday. On Friday, housing starts and building permits for December will be released. Additionally, the pace of earnings releases will pick up in the days ahead, including additional large diversified banking institutions. These corporations will also give their profit outlooks for the year ahead, which should help drive sentiment in that sector. -John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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