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Buying was seen in Utilities, Financials, Materials, with each sector ending with gains over 1%. The SPDR S&P Regional Bank ETF and the SPDR S&P Bank ETF gained 3% each.
Producer Price Index, which measures wholesale inflation, increased only 0.2% on a month-on-month basis, better than the 0.4% estimates. Core PPI, which excludes food and energy was flat. On a year-on-year basis, December PPI stood at 3.3%, compared to a 3.5% estimate.
All eyes are now on the retail inflation report, which will be released later this evening Indian time.
The consumer price index excluding food and energy is seen rising 0.2% in December after four straight months of 0.3% increases, according to the median projection in a Bloomberg survey of economists. The core CPI, a better snapshot of underlying inflation, is forecast to have risen 3.3% from a year earlier — matching readings from the prior three months.
Options traders are bracing for the US equity benchmark’s busiest CPI day since March 2023. The index is expected to move 1% in either direction on January 15, based on the cost of at-the-money puts and calls, according to Stuart Kaiser at Citigroup Inc.
A survey conducted by 22V Research showed 47% of investors expect the market reaction to CPI to be “risk-off,” 29% think “risk-on” and 24% said “mixed/negligible.” The survey also showed that 53% of the respondents believe that financial conditions need to tighten.
“Higher interest rates or some tightening of financial conditions appear needed for the US economy to achieve “macro balance” (core PCE closer to 2% and full employment), said Dennis DeBusschere at 22V.
The yield on 10-year Treasuries was little changed at 4.78%. The dollar slipped after Bloomberg News reported Donald Trump’s incoming economic team is considering gradual hikes in tariffs, helping avoid an inflation spike.
Oil dropped from a five-month high as Hamas and Israel tentatively agreed to a cease-fire, cooling a rally fueled by risks to Russian and Iranian supplies.
Wall Street is also gearing up for the unofficial start of the earnings season, with results from big banks hitting the tape on Wednesday.
Lenders including JPMorgan Chase & Co. and Wells Fargo & Co. are expected to show continued gains from trading and investment banking, which helped offset net interest income declines caused by higher deposits and sluggish loan demand.
(With Inputs From Agencies.)
