U.S. and World Markets Meander Amid Inflation and Rate Path Worries

Alexander Garcia
14 Jan, 2025
Miami

Stock market indexes lacked direction after the release of the producer price inflation report, as investors looked for clues about the inner workings of the economy. 

Investors have been on the defensive after two jobs reports last week confirmed that the jobs market is expanding at a faster-than-anticipated pace, signaling that the U.S. economy is on track to continue to grow at a healthier pace. 

The S&P 500 index decreased 0.4%, the Nasdaq Composite fell 0.5%, and the yield on the 10-year Treasury note halted its surge after the producer price index rose less than expected in December.

The measure of the wholesale price index rose 0.2% from the previous month, and the core index, which excludes volatile food and energy prices, was flat, according to a report released by the Bureau of Labor Statistics Tuesday. 

On an annual basis, producer price inflation accelerated to 3.3% in December from 3.0% in the previous month, and the core rate of inflation advanced to 3.5%. 

Market participants are sensitive to inflation reports after nonfarm payrolls expanded by faster-than-expected 256,000 in December, confirming that the jobs market is too strong for the Federal Reserve to lower rates at its next meeting, later in the month. 

Investors now shifted their attention to the release of the consumer price inflation report on Wednesday, which could provide deeper insights into the policymakers' options on rate policy. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.3% to 5,817.19, the Nasdaq Composite fell 0.4% to 19,001.16, and the Russell 2000 index inched up by 0.6% to 2,207.43. 

The yield on 2-year Treasury notes edged higher to 4.41%, 10-year Treasury notes inched up to 4.79%, and 30-year Treasury bonds increased to 4.98%.

WTI crude oil decreased $1.20 to $77.60 a barrel, and natural gas prices edged down 4 cents to $3.88 a thermal unit.

Gold increased by $4.92 to $2,672.85 an ounce, and silver rose by $0.19 to $29.87. 

The dollar index, which weighs the US currency against a basket of foreign currencies, decreased by 0.28 to 109.68 and traded at a two-year high. 

 

U.S. Stock Movers 

KB Home increased 10.6% to $70.86 after the home builder reported better-than-expected quarterly results. 

Revenue in the fourth quarter increased 19% to $1.99 billion from $1.67 billion, net income advanced 27% to $190.6 million from $150.3 million, and diluted earnings per share rose to $2.52 from $1.85 a year ago. 

Homes delivered in the quarter increased 17% to 3,978 homes, and net orders and net order value for the quarter both increased by 41%, reaching 2,688 and $1.32 billion, respectively. 

IAC Inc. increased 1.8% to $43.35 after the parent of Daily Beast and Match.com announced its plans to spin off home improvement marketplace Angi. 

Big banks traded higher ahead of their earnings releases on Wednesday. 

JPMorgan Chase jumped 0.1% to $244.40, Wells Fargo increased 0.7% to $71.0, and Citigroup advanced 0.8% to $73.35. 

Signet Jewelers Ltd. plunged 16% to $62.12 after the parent company of Zales lowered its fourth quarter outlook. 

The company estimated total sales in the fourth quarter to range between $2.32 billion and $2.335 billion, compared to the previous estimate between $2.38 billion and $2.46 billion. 

Same-store sales outlook in the quarter was lowered to a range between a decline of 2.0% and 2.5%, compared to the previous range between flat and an increase of 3.0%. 

The diamond jeweler said same-store sales in the ten-week period to January 11 declined 2% from a year ago. 

The company blamed the sales decline on "merchandise assortment gaps at key gifting price points" and customers seeking more items with promotional discounts. 

 

European Stock Markets Attempted, Euro Hovers Near 2-Year Low 

European stock market indexes advanced, and bond yields hovered near recent highs amid ongoing rate path uncertainties and political turmoil in France and Germany. 

Benchmark indexes in Frankfurt, Paris, Milan, and London rebounded from losses in the previous session as investors awaited the release of the U.S. trade policy. 

In the absence of domestic economic news, investors debated the possible rate paths and the impact of new and tougher U.S. sanctions on Russia's energy, shipping, and insurance companies. 

The euro and the pound hovered near two-year lows amid reduced expectations of additional rate cuts by the U.S. Federal Reserve, boosting the U.S. dollar. 

Moreover, a sluggish economic outlook in the eurozone is likely to keep the European Central Bank on track to lower its reference rate between 100 and 150 basis points over the next six months. 

 

Europe Indexes and Yields

The DAX index increased by 0.8% to 20,261.33; the CAC-40 index rose by 0.2% to 7,425.17; and the FTSE 100 index inched lower by 0.3% to 8,201.54. 

The yield on 10-year German bonds edged higher to 2.59%, French bonds rose to 3.45%, the UK gilts increased to 4.87%, and Italian bonds edged lower to 3.80%.

The euro edged lower to $1.02; the British pound inched lower to $1.214; and the U.S. dollar eased to 91.60 Swiss cents.

Brent crude decreased $1.13 to $79.87 a barrel, and the Dutch TTF natural gas fell by €1.22 to €47.05 per MWh. 

 

Europe Stock Movers

Ocado Group PLC gained 9.4% to 295.30 pence after the UK-based online grocery portal operator and grocery technology company reported a 17.5% surge in quarterly revenue. 

Retail revenue increased by 17.5% to £715.8 million from £609.4 million, driven by a 16.9% increase in weekly orders to 476,000 from 407,000 a year ago. 

The number of active customers increased 12.1% to 1.1 million from 0.998 million, the average item price was nearly unchanged at £2.75, and average basket value rose 0.2% to £120.85 from £120.62 a year ago. 

The company estimated fiscal year 2024 ending on December 1 revenue increased 13.9% to £2.69 billion, and the retailer reiterated its target of reaching "high mid single-digit adjusted EBITDA margin by the end of the first half. 

JD Sports Fashion PLC decreased 8.6% to 87.94 pence after the specialty retailer issued a profit warning. 

The company said organic comparable sales in December increased 3.4%, but comparable sales over the two-month period to December decreased 1.5% amid "current headwinds" in the market. 

The retailer held out for full-year organic revenue growth of 5%, and the company said it will release full financial statements in March.

JD Sports estimated pre-tax earnings before adjustments to range between £915 million and £935 million, and full-year gross margins are expected to be around 48%, matching the level in the year ago. 

 

Nikkei 225 Index Down 2% Amid Rate Path and Inflation Anxieties 

Stock market indexes in Tokyo traded sharply lower after investors returned from a holiday-extended weekend. 

The Nikkei 225 stock average fell 2%, and the TOPIX index declined 1.3%, and the market pullback was in line with global market weakness after the stronger-than-expected U.S. jobs growth in December lowered speculation of additional rate cuts by the U.S. Federal Reserve. 

Moreover, investors took a cautious view amid growing speculation that the Bank of Japan is likely to revise its estimate of inflation at this month's policy meeting, paving the way for future rate hikes. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average declined 2.1% to 38,400.09, and the broader TOPIX index decreased 1.3% to 2,679.44. 

Technology stocks led the decliners in Tokyo trading following sharp losses in New York in the previous two sessions. 

Tokyo Electron declined 3.8% to ¥26,010.0, Advantest Corp. dropped 8.7% to ¥9,474.0, and Disco Corp. decreased 7.5% to ¥44,460.0. 

The yen traded around 157.65 against the U.S. dollar, as the world's reserve currency continued to advance for the second month in a row amid rising U.S. bond yields. 

Mitsubishi UFJ Financial Group declined 2.6% to ¥1,854.50, Sumitomo Mitsui Financial decreased 1.3% to ¥3,706.0, and Mizuho Financial Group eased 1.2% to ¥3,838.0. 

Fast Retailing Co. Ltd. decreased 2.4% to ¥47,530.0, Seven & I Holdings fell 2.5% to ¥2,429.0, Isetan Mitsukoshi declined 2.2% to ¥2,440.50, and Takashimaya Co. Ltd. eased 0.9% to ¥1,226.0.

 

 

China Indexes Rebounded 2% After CSRC Vowed to Stabilize Markets 

Stock market indexes in China and Hong Kong rebounded from multi-month lows after China's securities regulator talked up the market amid promises of steps to stabilize markets. 

The Hang Seng index increased 1.4%, and the CSI 300 index advanced 2% following a statement released by the China Securities Regulatory Commission after a conference. 

Chinese officials are playing an age-old game of taking up markets while struggling to devise structural reform as top political leaders struggle to adjust to slower economic growth in the years ahead. 

Chinese politicians have shown little interest in tackling deep-rooted structural economic reforms, local government corruption amid falling foreign direct investments, and persistent weakness in property markets. 

Investors have generally looked beyond record exports and trade surpluses in December and 2024, because the rise in sales has not translated to a corresponding increase in earnings.

Investors are bracing for weak earnings growth in the December quarter and dialing down 2025 earnings growth expectations amid decelerating economic growth and ongoing property market malaise. 

 

China Stock Movers 

The Hang Seng index increased 1.4% to 19,145.88, and the mainland-focused CSI 300 index jumped 2% to 3,796.97. 

Wuxi AppTec Co. Ltd. increased 3.4% to ¥54.99 after the biotech company sold 86 million shares in a Cayman Islands-registered unit for HK $2.4 billion or $312 million. 

WuXi Biologics jumped 5.4% to HK $17.78 after the release of stake sale news. 

BYD increased 3.9% to HK $259.0, Li Auto advanced 2.9% to HK $87.75, and Xpeng Inc. increased 6.4% to HK $49.60. 

Alibaba Group Holding increased 1.8% to HK $79.50, Tencent Holdings advanced 3.4% to HK $378.60, and Baidu Inc. gained 2.7% to HK $77.55.