Dec 13, 2023: U.S. stocks appear set for a positive start on Wednesday following the release of new data signaling a potential easing in inflation just ahead of the Federal Reserve’s conclusive policy decision for the year, widely anticipated to maintain existing interest rates.
The Labor Department’s report unveiled a 0.9% annual rise in the Producer Price Index (PPI) for final demand in November, slightly below the 1% increase forecasted by Reuters-polled economists. On a month-to-month basis, producer prices remained unchanged, defying predictions of a 0.1% upswing.
Recent reports, including Tuesday’s consumer price index (CPI) data, have reinforced expectations that interest rates may have peaked, with market participants also foreseeing potential rate adjustments in the upcoming year.
This positive sentiment propelled Wall Street’s major indexes to attain fresh 2023 highs during Tuesday’s close.
According to Peter Cardillo, chief market economist at Spartan Capital Securities, “The figures are largely in line with projections and consistently show a favorable direction for inflation.”
All eyes are now on the imminent interest rate decision at the culmination of the Fed’s two-day meeting, scheduled for 2:00 p.m. ET.
Investor attention is also directed toward Fed Chair Jerome Powell’s remarks post-announcement and the unveiling of the “dot plot,” offering insights into the trajectory of monetary policy.
Market expectations strongly lean toward the Fed maintaining rates at the current 5.25%-5.50% range. Traders are now eyeing potential monetary easing next year, estimating a nearly 79% probability of at least a 25-basis-point rate cut in May 2024, as per the CME’s FedWatch tool.
The European Central Bank and the Bank of England are also due to disclose their policy decisions later in the week. Market analysts foresee relatively stable volatility owing to the impending expiration of nearly $5 trillion in U.S. stock options on Friday, touted to be the largest on record.
As of 8:46 a.m. ET, Dow e-minis were up 67 points (0.18%), S&P 500 e-minis rose by 9.25 points (0.2%), and Nasdaq 100 e-minis surged by 47 points (0.29%).
In individual stock movements, Tesla (NASDAQ:TSLA) declined 0.9% pre-market as the electric vehicle maker faces the loss of up to $7,500 in federal tax credits for certain Model 3 vehicles.
Pfizer (NYSE:PFE) experienced a 6.4% drop after forecasting 2024 revenue below Wall Street estimates, while Southwest Airlines (NYSE:LUV) slipped 2.0% post the carrier’s upward revision of fourth-quarter fuel cost projections.
Take-Two (NASDAQ:TTWO) Interactive Software gained 2.3% following the announcement of its inclusion in the Nasdaq 100 index, effective December 18.
