Narvik
US stocks were on course to finish higher on Monday and recoup some of last week’s losses, as market participants placed their bets ahead of Tuesday’s much-anticipated US consumer price index report.
In the last hour trading, technologically demanding Nasdaq Composite (COMP.IND) had up 1.30% to 11,870.12 points, which was also contributed by the jump in Microsoft shares (MSFT) and Meta (TARGET).
The benchmark S&P 500 (SP500) was 0.91% more to 4,127.67 points, while the blue-chip Dow (DJI) added 0.87% to 34,164.60 points.
All 11 S&P sectors – with the exception of Energy – traded in the positive, led by Technology and Consumer Discretion.
The market’s breakneck growth in 2023 took a breather last week, with all three major indexes recording losses. It was the benchmark S&P 500’s worst weekly performance of the new year so far, as sentiment was dampened by lingering worries about the Federal Reserve.
Tuesday’s CPI report will give an idea of the state of inflation and will no doubt set the stage for the Fed’s monetary policy going forward. Headline CPI is expected to show a 0.5% M/M increase in January, compared to a decline last month. On a year-over-year basis, headline CPI is expected to fall to 6.2%, while the core rate is expected to fall to 5.5%.
“Tomorrow on the most romantic day of the year, the pheromones in the financial community could be dictated by a pretty important US CPI print,” said Jim Reid of Deutsche Bank. “It seems like yesterday that US inflation prints were seen as last year’s news given the recent declines. Additionally, forecasts and breakevens suggest we are on a path to normalization over the next few months and quarters… However, that point of view got a bit of a jolt in the last 10 days.”
“First we printed payrolls which raised the prospect that the former haven’s core services could remain stronger for longer. Then we had a lot of hawkish central bank talk that the market had previously ignored but is now slowly waking up to. Then Manheim suggested that the US use cars ( +2.5% month on month in January) rose at their fastest rate in 14 months and finally on Friday we had US CPI revisions that rewrote the last year of history and in turn reduced core inflation by about a tenth each month leading by June and they’ve increased it by an average of about a tenth every month since August,” Reid added.
The economic calendar is light on Monday, but the week will be busy. In addition to Tuesday’s CPI report, traders will also get PPI data, retail sales and industrial production figures this week.
As for the fixed income securities market, government bond yields were mixed on Monday. The 10-year bond yield (US10Y) fell 2 basis points to 3.72%, while the 2-year bond yield (US2Y) rose 3 basis points to 4.54%.
Among active stocks, Fidelity National Information Services ( FIS ) was the biggest percentage loser on the S&P 500 ( SP500 ) after issuing weak guidance and revealing a plan to spin off one of its companies.
Blue Apron ( APRN ) fell after announcing a $70 million offering after hours on Friday.