A softer-than-expected Producer Price Index (PPI) print boosted equity futures on Tuesday morning but stocks closed mixed in the face of rising bond yields. This comes a day before the release of the final Consumer Price Index (CPI) report for 2024.
The Bureau of Labor Statistics said PPI rose by 0.2% month over month in December, short of a consensus forecast of 0.3% and down from 0.4% in November. On a year-over-year basis, PPI accelerated to 3.3% from 3.0%.
"It was encouraging to see the PPI Index come in well below expectations," observes Charlie Ripley, senior investment strategist for Allianz Investment Management, who notes too that wholesale price data doesn't translate directly into consumer price data. "Reaction in the bond market was relatively muted, but we are expecting a wider range of outcomes following tomorrow's release on the latest consumer price data."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The yield on the 10-year U.S. Treasury note traded up to 4.809% from Monday's close of 4.805% before settling at 4.786%. The 10-year Treasury yield has risen 142 basis points from 3.642% the day before the Federal Reserve started cutting interest rates in September.
The BLS will release December CPI data tomorrow at 8:30 am Eastern Standard Time. "The December CPI report should indicate that the underlying trend in inflation is not re-accelerating, but it is unlikely to allay the FOMC's increased concerns that inflation has become stuck uncomfortably above its target," write Wells Fargo economists Sarah House and Aubrey Woessner.
House and Woessner forecast month-over-month headline CPI rose 0.4% on gains in energy prices, pushing the year-over-year figure to 2.9%, a five-month high. The economists see core CPI, which excludes energy as well as food, easing from 0.3% to 0.2% month over month and leaving the year-over-year rate at 3.3% for a fourth straight month.
According to Stuart Kaiser, head of U.S. equity trading at Citigroup, the cost of at-the-money S&P 500 puts and calls indicates a move of 1% in either direction for the index on Wednesday. It would be the largest implied move ahead of the release of a CPI report since March 2023.
At Tuesday's closing bell, the Dow Jones Industrial Average inched up 0.5% to 42,518. The S&P 500 added 0.1% to 5,842, and the Nasdaq Composite gave back 0.2% to 19,044.
Weight loss drug sales weigh on LLY
Eli Lilly (LLY) stock was down 6.7% after management reported that sales of its blockbuster GLP-1 drugs will miss Wall Street's expectations for the second consecutive quarter and that overall fourth-quarter revenue of $14.5 billion will fall short of its guidance.
LLY has rallied more than 120% since 2023 on the potential of its obesity and Type 2 diabetes drugs, Zepbound and Mounjaro. For the fourth quarter, Eli Lilly expects sales of Mounjaro to be $3.5 billion vs a FactSet consensus of $4.4 billion. Zepbound sales will arrive at $1.9 billion, short of a $2.1 billion forecast.
Lilly's updated revenue guidance anticipates strong performance from its oncology, immunology and neuroscience medicines, and management's guidance for 2025 is slightly ahead of Wall Street's forecast, a range of $58 billion to $61 billion vs a FactSet-compiled consensus of $58.4 billion. The company will report its full quarterly results in early February.
Novo Nordisk (NVO), Eli Lilly's top competitor in GLP-1 drug space, declined 4.1%, while Viking Therapeutics (VKTX), which is still developing its own GLP-1 drugs, lost 12.7%.
Big banks prepare to report
Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM) and Wells Fargo (WF) highlight a big earnings calendar day on Wednesday.
Based on data collected by FactSet, "The Financials sector is predicted to report the highest year-over-year earnings growth rate of all eleven sectors for the fourth quarter at 39.5%."
Sean Ryan, the associate director of the banking and specialty finance sector at FactSet, notes that net interest margin and loan and deposit growth should be positives for the banks, while non-interest income and the impact of higher long rates will likely be negatives.
"The most important new information is likely to be refreshed forward guidance on the earnings calls," Ryan explains, "which is likely to skew bullish based on late fourth-quarter conference commentary, a steeper yield curve, and industry anticipation of a more favorable regulatory environment than has existed in several years."
Follow all our earnings coverage on Kiplinger's earnings season live blog.
Related content
- Kiplinger's Economic Calendar for This Week
- When Is the Next Fed Meeting?
- Three Ways President Trump Could Impact the Economy
-
Blue Collar Workers Add AI to Their ToolboxesThe Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
Stock Market Today: Stocks Chop as Chipmakers DeclineSeveral semiconductor stocks fell Friday on reports that the White House may consider revising license waivers for global chipmakers.
-
Stock Market Today: Stocks Chop as Chipmakers Decline
Several semiconductor stocks fell Friday on reports that the White House may consider revising license waivers for global chipmakers.
-
The $1 Million Retirement Question: Are You Being Tax-Smart About Your Pension?A financial planner raises some key considerations for navigating retirement with a pension and recommends four strategies.
-
The Costly Mistake You Might Be Making With Your First 401(k)Most people start contributing to their retirement savings later in life. That could be a big-time mistake, literally costing you thousands of dollars.
-
Why I Trust Bonds, Even NowColumnist Jeffrey Kosnett explains why he stands by investing in bonds.
-
An Estate Planning Attorney's Guide to the Importance of POAsRegularly updating your financial and health care power of attorney documents ensures they reflect your current intentions and circumstances. It's also important to clearly communicate your wishes to your chosen agents.
-
Divorce and Your Home: An Expert's Guide to Avoiding a Tax BombYour home is probably your biggest asset, so if you're getting a divorce, the stakes are high. Keep it? Sell it? You need to have a good plan in place for how to handle it.
-
Stock Market Today: Stocks Grapple for Peace Trade GainsOf course dramatic tension is high on Fed Day, only this time it's about war and peace as well as monetary policy.
-
Fewer Agents, Fewer Audits: How IRS Staff Cuts Are Changing EnforcementSignificant reductions in the IRS workforce appear to be increasing the number of 'no change' audit closures. The shift could potentially increase the overall tax gap — the difference between taxes that should have been paid and those that were.
