[New York Stock Market] Mixed Close Despite Unexpected Wholesale Price Slowdown... Focus on CPI

Last Month's PPI Rises 0.2% Month-on-Month, Below Expectations
Concerns Over Inflation Reigniting Partially Eased
Focus Shifts to December CPI Announcement the Following Day

The three major indices of the U.S. New York stock market closed mixed on the 14th (local time). The market initially welcomed the slowdown in wholesale price increases early in the session, but with the Consumer Price Index (CPI) announcement scheduled for the next day, investors grew cautious, causing fluctuations and a reduction in gains. The U.S. Treasury yields and the dollar value, which had risen the previous day, declined after the PPI release.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 42,518.28, up 221.16 points (0.52%) from the previous trading day. The large-cap-focused S&P 500 index rose 6.69 points (0.11%) to 5,842.91, while the tech-heavy Nasdaq index fell 43.71 points (0.23%) to 19,044.39.

By individual stocks, technology shares declined. Nvidia dropped 1.1%. Apple fell 0.48%, and Microsoft (MS) and Meta, the parent company of Facebook, slipped 0.36% and 2.31%, respectively. Palantir, an artificial intelligence (AI) software company, rose 1.43%.

The Producer Price Index (PPI) inflation rate released that morning unexpectedly slowed. According to the U.S. Department of Labor, the PPI for December last year rose 0.2% month-over-month, below both the previous month and expert forecasts (each 0.4%). The core PPI, which excludes volatile food and energy prices to show the underlying inflation trend, also rose 0% month-over-month, falling short of market expectations (0.3%) and even lower than November's 0.2%.

The decline in last month's PPI inflation rate eased some inflationary pressures, leading the market to show broad strength early in the session. Since the wholesale price index (PPI) affects the retail price index, the Consumer Price Index (CPI), with a time lag, the slowdown in PPI inflation spread relief across the market.

However, as investors shifted their focus to the CPI data to be released the following day, the market took a wait-and-see stance and gave back some of its gains. The CPI is a key inflation indicator closely watched by the U.S. Federal Reserve (Fed) alongside the Personal Consumption Expenditures (PCE) price index. Amid growing concerns about "Trumflation" (inflation caused by Trump's policies), investors are expected to try to anticipate the Fed's monetary policy path for the year based on the CPI data released on the 15th. December's CPI is forecasted to have risen 2.9% year-over-year, exceeding the previous month's figure of 2.7%.

Sam Stovall, Chief Investment Strategist at CFRA Research, said, "If the CPI comes out hotter than expected, it will definitely be bad news for the stock market," explaining that "it would mean the Fed will slow the pace of rate cuts."

Chris Bricati, Chief Investment Officer (CIO) at SWBC, said, "All eyes are on the CPI report," adding, "Weak inflation numbers will calm market fears about the Fed, but strong inflation numbers will reinforce the idea that there will be no rate cuts in 2025 and possibly even potential rate hikes."

Following the unexpectedly slowed PPI inflation rate, U.S. Treasury yields and the dollar weakened. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 2 basis points (1bp = 0.01 percentage points) from the previous day to 4.78%, while the 2-year Treasury yield, sensitive to monetary policy, dropped 3 basis points to 4.36%. The dollar index, which measures the dollar's value against six major currencies, declined 0.68% to 109.07 compared to the previous day.

Starting on the 15th, fourth-quarter corporate earnings announcements will begin, starting with Citigroup, Goldman Sachs, and JP Morgan.

International oil prices fell after news that ceasefire negotiations in the Gaza Strip were nearing agreement and forecasts that U.S. crude oil demand will be maintained this year. West Texas Intermediate (WTI) crude oil closed at $77.50 per barrel, down $1.32 (1.67%) from the previous day, while Brent crude, the global oil price benchmark, closed at $79.92 per barrel, down $1.09 (1.35%).