Stocks mostly traded higher today with the Dow trending slightly lower due to a sell-off in Boeing shares and ongoing uncertainty about potential interest-rate cuts. The Dow dropped approximately 0.1%, dragged lower by Boeing. The S&P, on the other hand, gained 0.5% while the Nasdaq Composite increased by 1.5%. Today’s session follows a losing week last Friday, which broke the market’s November/December win streak.
Boeing shares significantly impacted the Dow’s performance, plummeting as much as 9% after U.S. authorities grounded several 737 Max 9 jets following a midair fuselage incident over the weekend. This development also affected other related stocks, with Alaska Airlines and United Airlines, both operators of the Max 9 jet, losing ground. Additionally, Spirit AeroSystems, the fuselage maker, saw its shares drop by over 10%.
Investors are exercising caution after a tough start to 2024, largely attributed to fading expectations for an early rate cut from the Federal Reserve. Stronger-than-expected labor market data, including the surprisingly strong December jobs report, has sparked further discussion about the Federal Reserve’s policy direction.
Looking ahead to the rest of the week, investors will be watching the U.S. Consumer Price Index (CPI) release on Thursday. The CPI data will be critical after the “hot” jobs reading for December.
Friday’s Producer Price Index (PPI), consumer credit data, and the New York Fed’s 1-year inflation expectations survey are on their way, too, while the international trade balance figures are also due tomorrow. This week will feature several Federal Reserve speakers as well alongside Treasury auctions for 3, 10, and 30-year notes. Poor Treasury auctions have contributed to major intraday dips over the last few weeks and that trend is unlikely to change any time soon.
But that’s not all; earnings season unofficially kicks off on Friday with major financial institutions, including JPMorgan, Citi, Bank of America, and Blackrock, reporting their Q4 results. Inflation numbers from China and wage data from Japan will also be notable international economic releases.
In Europe, the focus will be on Germany’s trade balance and factory orders, as well as Eurozone sentiment indicators. Additionally, Italy and France are set to release industrial production and retail sales data, while the UK will publish its monthly GDP report for November.
Regarding the U.S. CPI data due on Thursday, Deutsche Bank’s economists expect both headline and core CPI to align closely with consensus estimates. The forecast suggests a slight uptick in year-over-year rates compared to consensus. If this prediction comes true, yields are likely to rise further. The 10-year Treasury yield dipped back below 4.0% today, but could easily jump above that level once more if a resurgence in inflation is observed on Thursday.
With stocks set to close significantly higher today, the market could be anticipating a dovish (aka, “cool”) inflation print. But will stocks be able to rise further if bulls get what they’re hoping for?
The S&P could certainly test its recent highs. However, a breakout above those highs seems unlikely given the market’s recent rip, which is still pricing in almost 6 rate cuts this year – a dovish goal that may be a little lofty.
