Stocks Whipsaw as CPI Report Underwhelms Traders: Markets Wrap

Stocks had a hard time finding direction after the latest inflation numbers underwhelmed traders waiting for a bigger deceleration that could allow the Federal Reserve to cut interest rates before the end of 2023.

(Bloomberg) — Stocks had a hard time finding direction after the latest inflation numbers underwhelmed traders waiting for a bigger deceleration that could allow the Federal Reserve to cut interest rates before the end of 2023.

The S&P 500 fluctuated after facing a series of twists and turns. Treasury two-year yields tumbled as many as 11 basis points. The dollar hovered near is lowest level since June.

The consumer price index, when paired with prior months’ lower-than-expected readings may pave the way for the Fed to downshift to a quarter-point hike at its next meeting ending Feb. 1. That said, the central bank’s work is far from over. Resilient consumer demand, particularly for services, paired with a tight labor market threaten to keep upward pressure on prices.

“The December CPI report has landed in the zone we are confident is consistent with the Fed slowing the pace of rate hikes again to 25bp in February, though we expect the Fed will try to make it a ‘hawkish 25’,” said Krishna Guha at Evercore ISI.

Fed Bank of Philadelphia President Patrick Harker said the central bank should lift rates in quarter-point increments “going forward” as it approaches the end point in its most aggressive tightening campaign in decades.

In corporate news, American Airlines Group Inc. said fourth-quarter profit and revenue exceeded expectations, helped by robust holiday travel demand. Workers at Twitter Inc.’s Singapore office were told to empty out their desks and vacate the premises, said people familiar with the situation, as Elon Musk continues to pare expenses around the globe.