Investors navigated a mixed stock market on Tuesday, with major indices showing divergent performance as anticipation built for upcoming economic data releases expected to shed light on the recent bond market slump. The Dow Jones Industrial Average closed with a notable gain, while the S&P 500 saw a slight increase, and the tech-focused Nasdaq Composite experienced a modest decline.
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Dow Outperforms, Nasdaq Dips
The Dow Jones Industrial Average climbed 221.16 points, or 0.52%, concluding the trading session at 42,518.28. The S&P 500 edged up by 0.11% to reach 5,842.91. In contrast, the Nasdaq Composite, heavily influenced by technology stocks, retreated 0.23%, finishing the day at 19,044.39.
December CPI Report in Focus
Market participants are keenly awaiting Wednesday’s release of the December 2024 Consumer Price Index (CPI) report. Jeffrey Roach, Chief Economist at LPL Financial, anticipates a continuation of the disinflationary trend, though at a potentially slower pace compared to previous months. Roach attributes this anticipated moderation in disinflation to the intricate economic environment as we progress further into 2025.
Mid-Day Market Volatility and Trump’s Tariff Remarks
Earlier in the day, stocks experienced a period of selling pressure following a message from then President-elect Donald Trump indicating his continued commitment to implementing stringent tariffs on imported goods upon assuming office. Trump, communicating via his Truth Social platform, suggested the creation of an “External Revenue Service” tasked with collecting tariffs, duties, and other revenues originating from foreign sources. This statement prompted a market reaction, with the S&P 500 temporarily dropping 27 points (0.46%) and the Nasdaq declining 121 points (0.64%). It’s important to clarify that tariffs are typically borne by domestic companies importing foreign goods, not by the countries producing those goods.
Producer Price Index and Inflationary Concerns
Market movements were also influenced by the release of the Producer Price Index (PPI) data, which revealed significant price increases in certain sectors, potentially impacting the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index. Samuel Tombs, Chief US Economist at Pantheon Macroeconomics, highlighted a noteworthy surge in prices for domestic scheduled passenger air transportation, representing the most substantial December increase since records began in 2001. Tombs’ analysis suggests that core PCE inflation might have risen to 3.0% in December, the highest level since March, up from 2.8% in November. This potential uptick in inflation further fueled investor uncertainty.
Market Outlook Hinges on Economic Data
In summary, the US stock market presented a mixed picture on Tuesday, reflecting investor anticipation for crucial economic data releases. The performance of the Dow, S&P 500, and Nasdaq diverged, underscoring the market’s sensitivity to upcoming inflation figures and potential policy implications. The December CPI report, expected on Wednesday, is poised to play a pivotal role in shaping market sentiment and influencing future investment decisions. The interplay between disinflationary trends, inflationary pressures, and policy responses will continue to guide market dynamics in the coming days and weeks.
