Stock Futures Rise as Cooler Inflation Data Sparks Market Optimism

NEW YORK (AP) — Stock futures climbed Tuesday after a key inflation report showed wholesale prices rose less than expected in December, offering hope that the Federal Reserve may ease its aggressive interest rate hikes. Futures tied to the Dow Jones Industrial Average gained 132 points, or 0.3%, while S&P 500 and Nasdaq 100 futures rose 0.4% and 0.5%, respectively.

The producer price index (PPI), which measures wholesale inflation, increased just 0.2% last month, according to the Bureau of Labor Statistics. Economists surveyed by Dow Jones had anticipated a 0.4% rise. Core PPI, excluding volatile food and energy prices, remained flat.

Investors are now turning their attention to Wednesday’s consumer price index (CPI) report, which will provide further insight into the Fed’s next steps on interest rates. “This light PPI print is stock market-friendly because it helps calm fears that we were on the verge of an inflation acceleration,” said Chris Brigati, chief investment officer at SWBC.

Fed funds futures trading indicates a near-certainty that the central bank will maintain current rates at its upcoming meeting later this month. Markets are pricing in a 79% chance that rates will remain within the 4.25%-4.5% range in March, according to CME Group‘s FedWatch Tool.

Banking giants are set to kick off fourth-quarter earnings season this week, with JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup reporting results on Wednesday. BlackRock and Delta Air Lines are scheduled to release earnings on Thursday.

In the Asia-Pacific region, markets mostly rose Tuesday, with Hong Kong‘s Hang Seng Index climbing 1.9% and mainland China’s CSI 300 surging 2.63%. Japan‘s Nikkei 225, however, fell 1.83%, extending its losing streak to four days.

On the corporate front, Bank of America analyst Alkesh Shah named Salesforce a top pick among software stocks for 2024, citing its potential in the growing field of “agentic AI.” Despite a 38% rally in 2023, Shah noted that Salesforce shares remain reasonably priced compared to its peers.

Meanwhile, wholesale alcohol distributor Southern Glazer’s Wine and Spirits saw its operations highlighted as a bellwether for consumer spending trends. The company’s Louisville, Kentucky, distribution center has become a focal point for analysts tracking economic activity.

As markets await Wednesday’s CPI report, investors remain cautiously optimistic. “All eyes are now on Wednesday’s CPI report, as it will fuel the market’s Fed-obsessed sentiment,” Brigati said. “A strong inflation number adds to this idea of no cuts in 2025, and potentially even a rate hike, while a weak inflation data point may help to calm the market’s Fed fears.”