The First Slice for Thursday, January 11, 2024

In recent news, U.S. stocks saw a rise, but the S&P 500 fell short of its all-time high due to comments from a key Federal Reserve policymaker. This week’s primary concern for investors is inflation and its impact on bond markets and the Federal Reserve’s monetary policy. All eyes are on Thursday’s December consumer price index (CPI) reading, which will provide insights into the inflation trend. Additionally, Friday brings high-profile corporate earnings reports from major banks like JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.

The Dow Jones Industrial Average climbed 170.57 points, or 0.45%.
The S&P 500 rose 26.95 points, or 0.57%.
The Nasdaq Composite gained 111.94 points, or 0.75%.

Market experts are cautiously optimistic about the prospects of disinflation, hoping for the Federal Reserve to cut interest rates sooner rather than later. However, there are concerns that inflation may not decline as expected, given the global economic environment. New York Fed President John Williams mentioned that interest rates may need to remain high until inflation returns to the Fed’s target of 2%.

The S&P 500, while close to a record high, did not quite reach it, reflecting the market’s uncertainty regarding the future of inflation. The yield on the 10-year Treasury note, a key indicator of borrowing costs, has decreased over the past few months. Inflation needs to move closer to the Fed’s 2% target to maintain the market’s bullish outlook, making December’s CPI figures crucial.

Economists expect the annual headline CPI inflation to increase to 3.2% in December, while the core reading (excluding volatile items) is expected to fall to 3.8% year-over-year. Despite potential improvements, some economic factors remain beyond the Fed’s control, like supply chain volatility, geopolitical risks, and the possibility of inflation resurgence……….[read more]

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