Stocks Drift As PPI Shows Bumpy Path To Fed’s Goal: Markets Wrap

Stocks struggled to find solid footing after the latest US inflation reading underscored the bumpy path Federal Reserve officials face in achieving their 2% target.

Equities fluctuated after data showed the producer price index increased by the most in 11 months — while trailing estimates. The data came a day after a hotter-than-estimated report on consumer inflation spurred a slide in equities and bonds, prompting traders to dial back their bets on Fed rate cuts. Treasuries were mixed, with shorter maturities outperforming longer-dated ones.

“The inflation data are noisy, and the market reflects that reality,” said Jamie Cox at Harris Financial Group. “The last mile of the inflation fight is going to be the most difficult. The Fed will cut into the noise, but not until after June.”

Several categories in the PPI report that are used to inform the Fed’s preferred inflation measure — the personal consumption expenditures price gauge — such as health care and portfolio management, came in softer.

While the latest PPI reading was constructive, investors should be prepared for fewer rate cuts this year — one or two — and for a first potential move not until the July meeting, according to Larry Tentarelli at Blue Chip Daily Trend Report.

“Although we understand the relief with which this report will be received, there is nothing very encouraging contained within it — and the best that can be said is that there was ‘no new bad news’ either,” said Michael Shaoul at Marketfield Asset Management.

Fed Bank of New York President John Williams said the central bank has made “tremendous progress” toward better balance on its inflation and employment goals, but acknowledged policymakers are not yet done.

Corporate Highlights:

• Apple Inc. is drawing interest from hedge fund investors seeing potential for AI-linked upgrades to its iPhones and as a slump in its shares reduces the stock’s valuation premium, JPMorgan Chase & Co. analysts say.
• Nike Inc. was raised to buy at Bank of America Corp., which said consensus estimates “finally look achievable” after projections for fiscal 2025 dropped 35% over the past two years.
• CarMax Inc., a used-car dealer, reported disappointing profit and sales.
• Intercontinental Exchange Inc., the index provider and owner of the New York Stock Exchange, is consulting investors on whether to change its definition of a sovereign issuer so that debt issued by the European Union can be included in key government bond indexes.
• Tesla Inc.’s Chief Executive Officer Elon Musk is set to visit India and meet with Prime Minister Narendra Modi, sparking speculation about the US company’s investments in the South Asian nation just ahead of the start of national elections.
• Deutsche Lufthansa AG clinched a wage accord with cabin crew, ending months of intense negotiations that had been punctured by crippling strikes at Europe’s largest airline group.

Key events this week:

• China trade, Friday
• US University of Michigan consumer sentiment, Friday
• Citigroup, JPMorgan and Wells Fargo due to report results, Friday.
• San Francisco Fed President Mary Daly speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 9:47 a.m. New York time
• The Nasdaq 100 rose 0.3%
• The Dow Jones Industrial Average fell 0.2%
• The Stoxx Europe 600 fell 0.2%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0738
• The British pound rose 0.2% to $1.2559
• The Japanese yen was little changed at 153.04 per dollar

Cryptocurrencies

• Bitcoin fell 0.2% to $69,696.51
• Ether fell 0.6% to $3,493.18

Bonds

• The yield on 10-year Treasuries was little changed at 4.54%
• Germany’s 10-year yield advanced one basis point to 2.44%
• Britain’s 10-year yield advanced four basis points to 4.19%

Commodities

• West Texas Intermediate crude fell 0.8% to $85.53 a barrel
• Spot gold rose 0.5% to $2,346.82 an ounce

Source