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Monday’s relief for US equities was short-lived as equities traded off yesterday with Technology (0.16%) and Consumer Staples (0.26%) posting the only sector gains. Aside from Energy dropping 1.60%, Utilities (-0.82%) and Materials (1.15%) led markets lower. Technology’s gains were enough to push the Nasdaq Composite into positive territory gaining 0.09% but the S&P 500 fell 0.15%, the Dow dropped 0.42% and the Russell 2000 closed 1.05% lower.
In A Holding Pattern Ahead of the December CPI Report
We have another potential calm before the storm day in the stock market as investors and market pundits wait for tomorrow’s December Consumer Price Index (CPI) report. What that report reveals about inflation could foster the market re-thinking the pace of expected Fed rate cuts for this year. Despite several Fed officials calling for not only far fewer rate hikes in 2024 and a far later start for those cuts, the market so far continues to call for six rate cuts this year, with the first one slated for March.
Perhaps the market will heed potentially sobering comments from New York Fed president John Williams this afternoon, but the market is likely to put more weight behind post-CPI report comments from Richmond Fed President Tom Barkin (Thursday) and Minneapolis Fed president Neel Kashkari (Friday). Barring a December core CPI print that surprises significantly to the downside compared to the market expectation for +3.8% YoY (+0.3% MoM), at a minimum those Fed officials could cite continued wage pressure and the sharp rise in shipping rates as reasons for taking a more measured approach to rate cuts.
In other news:
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Shipping rates continue to rise steeply, while vessels face weekslong delays on account of diversions from the Red Sea around the Horn of Africa to avoid attacks by Iran-backed Houthi rebels. According to Drewry's World Container Index which tracks freight rates on eight trade routes, the average shipping costs for 40-foot containers have nearly doubled since the attacks began.
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The World Economic Forum’s “Global Risks Report 2024” ranked AI-derived misinformation and disinformation ahead of climate change, war, and economic weakness.
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The Securities and Exchange Commission experienced a “cybersecurity incident” yesterday when its X account was compromised and a fake post claiming that the agency green-lit plans for a spot-Bitcoin ETF, which fueled a brief surge in the price of Bitcoin. The commission soon followed up with a subsequent post walking back the claim providing BTC holders with some unusual intraday volatility. BTC ended the day down 2.03%.
Related: Negative Earnings Announcements, More Pushback on Fed Rate Cuts