New York Stock Market Rises on Slower Wholesale Price Increase... Treasury Yields Ease

Last Month's PPI Rises 0.2% Month-on-Month, Below Expectations
Inflationary Pressure Eases... Treasury Yields and Dollar Decline
Focus on December CPI to Be Released on the 15th

The three major indices of the U.S. New York stock market all rose in early trading on the 14th (local time). Investor sentiment revived as inflationary pressures eased somewhat following a slowdown in the wholesale price increase last month.

As of 10:06 a.m. in the New York stock market that day, the Dow Jones Industrial Average (Dow Index), centered on blue-chip stocks, was trading at 42,440.52, up 0.34% from the previous day. The S&P 500 Index, focused on large-cap stocks, rose 0.32% to 5,855.1, and the Nasdaq Index, centered on tech stocks, jumped 0.47% to 19,177.1.

The wholesale price increase released that morning slowed unexpectedly. According to the U.S. Department of Labor, the Producer Price Index (PPI) for December last year rose 0.2% month-over-month, falling short of both the previous month and experts’ forecasts (each 0.4%). The core PPI, which excludes volatile food and energy prices and shows the underlying trend of inflation, also recorded a 0% increase month-over-month. This was lower than the market expectation (0.3%) and even lower than November’s figure (0.2%).

With inflationary pressures having reignited recently, the slowdown in last month’s PPI rise somewhat eased concerns about price increases. Ahead of the inauguration of President-elect Donald Trump on the 20th, the market had been worried that tariff hikes and immigration restrictions would push prices up. Since the wholesale price index PPI affects the retail price index Consumer Price Index (CPI) with a time lag, the slowdown in PPI growth brought relief to the market.

Charlie Ripley, Chief Investment Strategist at Allianz Investment Management, said, "While wholesale price indicators do not necessarily translate directly into consumer price indicators, the PPI falling significantly short of expectations is encouraging," adding, "We will be able to see the broader market reaction after the consumer price data is released the next day."

Government bond yields are falling. The U.S. 10-year Treasury yield, a global bond yield benchmark, dropped 2 basis points (1bp = 0.01 percentage points) from the previous day to 4.78%. The 2-year Treasury yield, sensitive to monetary policy, moved down 3 basis points to 4.36%.

The U.S. dollar is also weakening. The Dollar Index, which measures the dollar’s value against six major currencies, fell 0.34% from the previous day to 109.44.

The market is focusing on the CPI to be released the following day on the 15th. The CPI is a key inflation indicator closely watched by the U.S. Federal Reserve (Fed) alongside the Personal Consumption Expenditures (PCE) price index. The CPI data is expected to provide clues about the Fed’s monetary policy path for the rest of the year. The December CPI is expected to have risen 2.9% year-over-year, exceeding the previous month’s figure (2.7%).

Chris Bricati, Chief Investment Officer (CIO) at SWBC, said, "All eyes are on the CPI report," adding, "Weak inflation data would calm market fears about the Fed, but strong inflation data would suggest no rate cuts in 2025 and even increase the possibility of potential hikes."

Investors are almost certain that the benchmark interest rate will be held steady this month. The federal funds futures market reflects a 97.3% probability that the Fed will keep rates unchanged at the Federal Open Market Committee (FOMC) regular meeting scheduled for the 28th-29th. The chance of a hold in the first half of the year is also as high as 43.5%.

This week also marks the start of fourth-quarter corporate earnings announcements. Beginning on the 15th, financial firms such as Citigroup, Goldman Sachs, and JP Morgan will release their results, followed by Morgan Stanley and Bank of America (BoA).

By sector, tech stocks are on the rise. Nvidia is up 0.62%. Apple and Microsoft (MS) are rising 0.51% and 0.18%, respectively. Palantir, an artificial intelligence (AI) software company, is jumping 3.57%.

International oil prices calmed after hitting a four-month high the previous day on news of additional U.S. sanctions on Russian crude oil. West Texas Intermediate (WTI) crude oil is trading at $78.58 per barrel, up $0.24 (0.3%) from the previous day, while Brent crude, the global oil price benchmark, rose $0.36 (0.44%) to $80.65 per barrel.