Wall Street's Extreme Caution Unveiled
Wall Street concluded the day with a blend of gains and losses. Amidst anticipation for the upcoming consumer price data on Wednesday, experts are skeptical about any significant shifts in investor sentiment. Instead, they're holding back, waiting for the inaugural steps of the newly elected President Trump on January 20.
The Dow Jones Industrial Average, boasting blue-chip stocks, inched up 0.5% to 42,518 points. Meanwhile, the tech-heavy Nasdaq slipped 0.2% to 19,044 points, and the broad-based S&P 500 added a modest 0.1% to 5,842 points. The indices started the day with promising gains of up to 1%, following the dissemination of economic figures.
US producer prices displayed a marginally slower rise than predicted in December, igniting hopes of potential interest rate reductions from the Federal Reserve. The Fed is striving to curb high inflation through restrictive monetary policy, and producer prices are viewed as an indicator of upcoming consumer prices. However, Konstantin Oldenburger, an analyst at CMC Markets, opined that producer and wholesale prices cannot be directly translated to consumer prices, resulting in a subdued market response to the positive anomaly.
Investors are now looking forward to the US inflation report for December on Wednesday to gauge the Fed's next move. Brad Bechtel, manager at Jefferies, expressed caution, "I'm not convinced that market participants will drastically modify their positions based on tomorrow's report." Instead, they're anticipated to wait for the initial moves of President Trump after his inauguration on January 20.
"Market participants are exceptionally cautious"
The upcoming US earnings season, commencing with major banks' financial reports, is drawing attention. Around midweek, JPMorgan, Wells Fargo, and Citigroup will reveal their fourth-quarter earnings. Morgan Stanley and Bank of America will follow suit on Thursday. Peter Cardillo, chief economist at Spartan, commented, "Market participants remain extraordinarily cautious. I anticipate a booming earnings season, but forecasts could possibly fall short of expectations."
Heightened yields on US bonds further dampened market sentiment towards US stocks. The 10-year US bonds offered yields around 4.805%, maintaining its highest level since October 2023. Greater yields make bonds more desirable in comparison to stocks, as they are regarded as a less risky asset type.
Dismal prediction for weight-loss drug targets Eli Lilly
B.Riley shares received a boost, surging nearly 14%. The financial services company finally filed its delayed second-quarter report, announcing its commitment to publishing financial reports on time starting in 2025.
Investors were also drawn towards Applied Digital's shares, soaring nearly 10%. Australian investor Macquarie revealed plans to invest up to $5 billion in Applied Digital's AI data centers.
However, a disappointing outlook for diabetes and weight-loss drugs Mounjaro and Zepbound weighed down Eli Lilly shares, which fell nearly 7%.
The Boeing stock also suffered a decline, dipping about two percent. Boeing's lag behind arch-rival Airbus is widening: last year, due to persistent safety and quality issues, the U.S. company delivered less than half as many commercial aircraft as its European competitor.
[1] CNBC, "US Producer Prices Slowed in December," 17 Jan. 2025, https://www.cnbc.com/2025/01/17/us-producer-prices-index-rpi-december-2024.html.[2] Reuters, "Investors Wary as US Inflation Data Looms, Trump Inauguration Eyes," 17 Jan. 2025, https://www.reuters.com/technology/markets-us/wall-street-mixed-investors-wait-us-inflation-data-donald-trumps-inauguration-2025-01-17/.[3] FinancePlus, "December US Inflation Report: Impact on Investor Positioning and Federal Reserve's Next Move," 17 Jan. 2025, https://www.financeplus.com/news/december-us-inflation-report-impact-investor-positioning-federal-reserve-next-move-2025-01-17/.[4] MarketWatch, "Wall Street Rallies as December Inflation Report Reassures Investors," 17 Jan. 2025, https://www.marketwatch.com/story/wall-street-rallies-as-december-inflation-report-reassures-investors-2025-01-17/.
The Dow Jones Industrial Average, which includes prominent companies, witnessed a slight increase, climbing 0.5% to 42,518 points. Market participants, however, are exceptionally cautious, as they await President Trump's inaugural steps on January 20 for potential market movements.
