US stock indices ended trading in different directions

On Tuesday, Wall Street saw mixed dynamics: the S&P 500 index managed to add, while the Nasdaq ended the session in the red. Investors continued to analyze the latest inflation data and prepared for the publication of quarterly reports, which should confirm the fairness of stock valuations and demonstrate the resilience of the American economy.

Volatile day: the market has not decided on the direction

During the day, stock indices changed direction several times. Stocks initially received a boost after the Labor Department released data showing that the producer price index rose less than expected in December. However, the report failed to dramatically change expectations for the Federal Reserve's monetary policy actions.

Investors are looking ahead to the Consumer Price Index (CPI) on Wednesday, which is expected to be a key guide to inflation forecasts and the Fed's plans.

Inflation and Rates: Uncertainty Remains

"Investors are facing a degree of uncertainty around the future of Fed policy and interest rate dynamics," said Chris Fasciano, chief market strategist at Commonwealth Financial Network. "We'll see what tomorrow's report reveals," he added, referring to the CPI release.

Trading Results

The Dow Jones Industrial Average ended the session up 221.16 points, or 0.52%, to 42,518.28. The S&P 500 Index rose 6.69 points, or 0.11%, to close at 5,842.91, while the Nasdaq Composite lost 43.71 points, or 0.23%, to close at 19,044.39.

Rate Outlook

According to LSEG, market participants expect the Fed to cut rates by about 29 basis points by the end of 2025. However, the probability of a 25 basis point cut before the June meeting is estimated at less than 50%.

Market Remains Cautious Amid High Bond Yields

Investors remain cautious amid high U.S. Treasury yields. The yield on the 10-year note, the market benchmark, was at 4.784%, close to the 14-month high recorded earlier in the week. This factor puts additional pressure on asset valuations.

Banks begin earnings season

The earnings season for major US banks begins on Wednesday. Their reports are expected to show an increase in profits due to active growth in trading activity and successful deals. The S&P 500 bank index (.SPXBK) showed growth against the backdrop of these expectations.

One of the leaders was Goldman Sachs, whose shares rose by 1.52% ahead of the publication of the quarterly report. This strengthened the position of the Dow, which managed to finish the day in the green zone.

Valuations remain overvalued

The current quotes of the S&P 500 are significantly higher than its historical long-term average. This creates a risk that possible disappointments in the earnings season could affect further growth of shares. Market participants are closely watching the company's performance to assess the outlook for the economy and maintain confidence in their investments.

Healthcare Under Pressure

The health care sector (.SPXHC) was the worst performer among the 11 major S&P sectors, losing 0.94%. One of the main reasons was a sharp decline in Eli Lilly shares, which fell 6.59%. The company forecast fourth-quarter sales of its weight-loss drug Zepbound at a level that was below market expectations.

The Fed and the Policy Outlook

Kansas City Federal Reserve President Jeff Schmid noted that the impact of Trump's economic policies continues to be discussed at the central bank. He stressed that the Fed is prepared to respond if key inflation or employment targets are subject to change.

Stocks Under Pressure: Investors Fight Uncertainty

After a wild rally triggered by the US election results, stock markets are again in turbulence. The S&P 500 has ended lower in four of the past five weeks. The main reasons were a stable economy, rising inflation and statements from Federal Reserve officials that raised doubts about the regulator's readiness to cut interest rates more quickly than previously expected.

Inflation, Trade Risks Remain in Focus

Adding to the uncertainty are concerns about new tariffs that the Trump administration could impose, which analysts say could further fuel inflation risks, making the Fed's job even more difficult.

Boeing Slips

Amid the overall tension, Boeing (BA.N) shares fell 2.08%. That came after the planemaker's annual deliveries in 2024 were at their lowest since the start of the pandemic. The drop underscores the industry's struggles to recover from the global crisis.

Stock Market Action: Selling Prevails

On the New York Stock Exchange, declining stocks outnumbered advancing ones by a ratio of 2.81 to 1. On the Nasdaq, the figure was 1.39 to 1. Trading volume on U.S. stock markets totaled 13.58 billion shares, below the 20-day average of 15.72 billion shares.

Ahead of the Crucial Day: Markets Hold Still

World stock markets remained in a state of anticipation on Wednesday. Investors eagerly awaited the release of U.S. consumer price index data, which could dramatically change expectations for future monetary policy. At the same time, market participants were trying to figure out whether quarterly earnings from major banks would live up to analysts' lofty forecasts.

Futures Show Stability Ahead of Key Reports

In Asia, U.S. stock futures were little changed, while European indices showed modest gains. Futures on the pan-European STOXX 50 index added 0.1%, while Britain's FTSE rose 0.2%. This was amid expectations of UK inflation data that could trigger a fresh wave of government bond selling.

Asian markets: mixed dynamics

MSCI's broad index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.2%. Japan's Nikkei (.N225) traded volatilely, showing fluctuations between gains and losses, and ended the day down 0.3%. The main movements in the region were related to the Japanese yen and government bond yields.

Japanese yen strengthens amid rate hike expectations

The dollar fell 0.4% to 157.3 yen, as market participants see a 70% chance of the Bank of Japan raising interest rates as early as January. These forecasts were reinforced after Bank of Japan Governor Kazuo Ueda said that a change in monetary policy would be discussed next week. Ten-year Japanese government bond yields rose to 1.255%, the highest since 2011.

US inflation in focus

Investors around the world are eagerly awaiting the release of US consumer price index (CPI) data later on Wednesday. Forecasts are for a modest 0.2% increase in the headline figure. However, any reading above 0.3% could trigger a fresh wave of sell-offs in stocks and bonds, adding to pressure on global markets.

Key expectations: What will the CPI bring?

Investors are awaiting the consumer price index (CPI) data, which will be a key factor in market dynamics in the coming days. JPMorgan analysts noted in a note to clients that the CPI results could determine the future trajectory of markets:

• A dovish reading could give fresh impetus to the rally, especially amid a strong earnings season;

• A hawkish CPI, on the other hand, could push 10-year Treasury yields to 5%, increasing volatility and putting additional pressure on stocks.

PPI Surprises with Moderation

The December PPI data were released overnight and were unexpectedly muted. The main indicator was unchanged on a monthly basis, weakening the US dollar and pushing short-term Treasury yields down from their recent highs. Against this backdrop, the S&P 500 ended the session with a slight gain of 0.1%.

The impact of these data, however, was short-lived. While the 10-year yield initially fell, it quickly rebounded to end the day just below 4.809%, near its recent highs.

Asian session: stability awaits

In Asian markets on Wednesday, the benchmark US 10-year Treasury yield fell 1 basis point to 4.778%, indicating caution ahead of key CPI data.

Bank earnings: intrigue remains

The focus of market participants is on the quarterly earnings reports of US banks for the fourth quarter of 2024. Giants such as Citi (C.N) and JPMorgan (JPM.N) are expected to post strong results, thanks to active deal and trading activity. These reports could set the tone for the entire earnings season.

UK back in focus

European markets are focusing on the UK, where fiscal uncertainty continues to weigh on government bonds. Yields on UK debt have hit 16-year highs, reflecting growing concerns about the country's economic outlook.

A new UK inflation report due on Wednesday should shed some light on the situation. Headline inflation is expected to remain at 2.6% over the past month.

Pound close to one-year low

In the currency market, sterling weakened slightly, falling 0.1% to $1.2198. That's just a few notches above its one-year low of $1.2099. Ongoing uncertainty continues to weigh on the British currency.

Oil: Moderate gains

In commodity markets, oil prices are showing a recovery after a significant decline the day before, when quotes fell more than 1%.

U.S. crude futures rose 0.5% to $77.92 a barrel;

Brent crude added 0.4% to trade at $80.21 a barrel.

These figures suggest the market is stabilizing, although global risks remain a key factor for traders.