(Bloomberg) — Wall Street traders looked past hot inflation data, with stocks up and bond yields down amid signals the Federal Reserve’s favored price gauge will be softer than expected.
Most major groups in the S&P 500 rose, with megacaps outperforming amid gains in Tesla Inc. and Nvidia Corp.’s shares. Cisco Systems Inc. jumped on an upbeat sales forecast. Meta Platforms Inc. lost steam after an 18-day rally. Treasuries climbed across the curve, rebounding from the worst selloff since December. The dollar fell after a CNBC reporter posted on X that President Donald Trump’s new tariffs set to be announced Thursday will not go into effect until possibly April 1.
The producer price index rose in January by more than forecast. Several of its components feed into the Fed’s preferred inflation measure — the personal consumption expenditures price index. Those categories were more favorable in January, registering declines in most health care items and in airfares. The next PCE will be released on Feb. 28.
“While PPI was much higher than expected, with even higher revisions, the real data that goes into PCE was weaker,” said Andrew Brenner at NatAlliance Securities. “And PCE is the one that Jerome Powell and the Fed look at. So in reality, the numbers are better.”
The S&P 500 rose 0.4%. The Nasdaq 100 added 0.7%. The Dow Jones Industrial Average gained 0.2%.
The yield on 10-year Treasuries fell seven basis points to 4.55%. The Bloomberg Dollar Spot Index lost 0.4%.
The PPI for final demand climbed 0.4% from a month earlier following an upwardly revised 0.5% increase in December, according to a Bureau of Labor Statistics report released Thursday. The median forecast in a Bloomberg survey of economists called for a 0.3% gain. Compared with a year ago, the PPI increased 3.5%.
“Overall, better news than yesterday on price inflation, but core PCE still comes in well above the 2% target, and the Fed will be braced for bigger increases in PCE in February and March too, repeating what happened last year,” said Paul Ashworth at Capital Economics.
Despite the better outlook for PCE, the latest price reading serves as further evidence that inflation progress has at least stalled — if not in danger of being reversed. Combined with a solid labor market, it will likely keep the Fed on hold for the foreseeable future.
“PPI confirmed yesterday’s hot CPI, and along with another low jobless claims number, we continue to see a picture that doesn’t include Fed rate cuts anytime soon,” said Chris Larkin at E*Trade from Morgan Stanley.
Bearish Trade Looming
A bearish trade is looming for US equities, according to Goldman Sachs Group Inc.’s Scott Rubner.
The market is increasingly crowded and dip-buying is running out of steam, Rubner said. The managing director for global markets and tactical specialist was rightfully bullish heading into 2025, while touting an upcoming negative turn. In a note on Wednesday, he said this was his “last bullish email” for the first quarter.
“Everyone is in the pool, including retail traders, 401k inflows, start of the year allocations, and corporates,” he said. “The flow demand dynamics are quickly changing, and we are approaching negative seasonals.”
Corporate Highlights:
Apple Inc.’s iPhones will use Alibaba Group Holding Ltd.’s AI technology, the Chinese firm’s chairman said, affirming reports the e-commerce pioneer had scored a coveted role in helping power the iPhone in the world’s top mobile arena.
Cisco Systems Inc. gave an upbeat sales forecast for the current quarter, helped by companies spending more on computing infrastructure to take advantage of AI technology.
Deere & Co., the world leader in farm machinery, anticipated another challenging year with grain and soy growers still not spending.
Robinhood Markets Inc. reported revenue that more than doubled as the online trading firm was buoyed by crypto-market transactions around the US presidential election.
Reddit Inc.’s fourth-quarter user growth missed Wall Street’s expectations, a sign the newly public company is struggling to keep up with larger digital advertising peers Meta Platforms Inc. and Google.
Molson Coors Beverage Co. reported profit that beat expectations, with a lift from sales outside of the US.
Barclays Plc shares plunged after the British bank left its earnings guidance for next year unchanged.
Nestle SA climbed after sales growth at the world’s biggest foodmaker edged up from historically low levels in the final quarter of last year.
Key events this week:
Eurozone GDP, Friday
US retail sales, industrial production, business inventories, Friday
Fed’s Lorie Logan speaks, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.4% as of 10:18 a.m. New York time
The Nasdaq 100 rose 0.7%
The Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 rose 0.9%
The MSCI World Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.5% to $1.0436
The British pound rose 0.5% to $1.2513
The Japanese yen rose 0.6% to 153.55 per dollar
Cryptocurrencies
Bitcoin fell 1.4% to $96,257.2
Ether fell 1% to $2,655.12
Bonds
The yield on 10-year Treasuries declined seven basis points to 4.55%
Germany’s 10-year yield declined five basis points to 2.43%
Britain’s 10-year yield declined five basis points to 4.50%
Commodities
West Texas Intermediate crude fell 0.2% to $71.25 a barrel
Spot gold rose 0.5% to $2,918.61 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Viljoen, Macarena Muñoz and Winnie Hsu.
More stories like this are available on bloomberg.com
