Last Updated: 4:00PM EST
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Stock indices finished today’s trading session mixed. The Nasdaq 100 (NDX) and the S&P 500 (SPX) gained 0.07% and 0.08%, respectively. Meanwhile, the Dow Jones Industrial Average (DJIA) slipped 0.31%.
Earlier today, Barclays economists adjusted their forecasts in light of recent economic data and now predict the Federal Open Market Committee (FOMC) will begin cutting interest rates as early as March. In addition, they anticipate a 25-basis-point reduction at every alternate meeting, a shift from their previous expectation of cuts starting in June.
This revised outlook is based on the latest soft Producer Price Index data (see update below) and the projection that core PCE inflation will hit 1.9% in the second half of 2023 and reach 2.4% year-over-year by the end of 2024. Consequently, they expect the federal funds rate target range to drop to 4.25%-4.50% by the end of 2024 from its current level of 5.25%-5.50%.
Similarly, billionaire hedge fund manager Bill Ackman of Pershing Square Capital Management anticipates more than three rate cuts by the Fed. During a CNBC interview, Ackman argued that anything less than three cuts would be insufficient, given the current high real cost of money with cooling inflation.
Ackman believes that a timely and substantial reduction in rates by the Fed could bolster equities and help avert a significant recession. This perspective suggests a more aggressive approach to rate cuts than some analysts expect, highlighting varied opinions in the financial sector about the Fed’s potential actions.
Last Updated: 10:30AM EST
Stock indices are mixed so far in today’s trading session after the wholesale prices in December took a dip, offering a glimmer of hope in the fight against inflation. The Labor Department’s latest report shows that the producer price index (PPI) decreased by 0.1% for the month. For reference, economists were anticipating a 0.1% rise. When food and energy were taken out of the equation, the core PPI remained unchanged compared to predictions of a 0.2% increase.
Similarly, the PPI excluding food, energy, and trade services matched forecasts with a 0.2% rise. Over the entire year, this measure climbed by 2.5%, a significant drop from the 4.7% increase seen in 2022.
This welcome news about PPI contrasts sharply with the less optimistic report from just a day earlier, where consumer prices were shown to have increased by 0.3% in December, culminating in a 3.4% rise over the year. These figures exceeded Wall Street expectations and remain notably above the Federal Reserve’s 2% inflation target.
However, PPI is often regarded as a more predictive indicator, as it tracks the prices businesses receive for goods and services still in the production pipeline. This distinction suggests that PPI could offer a more forward-looking insight into the inflationary trends affecting the economy.
First Published: 3:40AM EST
U.S. Futures trended lower on Friday as investors looked ahead to this week’s second key inflation report, due today. Futures on the Nasdaq 100 (NDX), S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) are down by 0.28%, 0.26%, and 0.17%, respectively, at 3:13 a.m. EST, January 12.
Among the key economic releases lined up for today is the Producer Price Index (PPI) for December. The report measures the costs of producing consumer goods and is seen as a good pre-indicator of inflationary pressures. Experts currently expect PPI to have increased by 0.1% month-over-month in December. Furthermore, a preliminary reading of January’s Michigan Consumer Sentiment Index is scheduled for release today.
Moving to important earnings today, four major banks, namely Citigroup (C), JP Morgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC), will kick off the earning season for banks. Also, airline company Delta Air Lines (DAL) and health insurance provider UnitedHealth (UNH) are expected to report their results today.
Meanwhile, oil prices were trending higher at the time of writing as the transport of fuel and goods through the Red Sea continued to be disrupted. The WTI crude oil futures were up, hovering near $73.63 per barrel as of the last check.
Elsewhere, European markets opened higher on Friday as investors digested encouraging U.K. economic data and remained focused on the upcoming U.S. inflation report.
Asia-Pacific Markets End Mixed on Friday
Asia-Pacific indices ended today’s session on a mixed note. Investor sentiments were hurt by a year-over-year decline in China’s annual exports and a fall in consumer prices for the third straight month, which reflects weak domestic demand.
Hong Kong’s Hang Seng index and China’s Shanghai Composite and Shenzhen Component indices closed lower by 0.35%, 0.16%, and 0.64%, respectively.
Meanwhile, Japan’s Nikkei and Topix indices ended up by 1.5% and 0.46%, respectively.
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