Uptick in US CPI data weighs on markets

Stocks moved lower Thursday, shrugging off a fresh round of inflation data that reflected an uptick in consumer prices for December.

The Nasdaq Composite closed at the flat line, settling at 14,970.19. The Dow Jones Industrial Average eked out a gain of 15.29 points, or 0.04 per cent, to close at 37,711.02. The S&P 500 edged lower by 0.07 per cent to end at 4,780.24. Earlier in the session, the broad market index briefly traded above its record closing high of 4,796.56.

December’s consumer price index report came out slightly higher-than-expected, reflecting a 0.3 per cent increase in consumer prices for the month, pushing the annual rate to 3.4 per cent. Economists polled by Dow Jones had predicted that the CPI rose 0.2 per cent in December and 3.2 per cent on a year-over-year basis.

Core CPI, excluding volatile food and energy prices, came out in line with expectations, however, pointing to persistent — yet easing — inflation pressures. The data released on Thursday suggests that future interest rate cuts may be slower to come.

Yields rose on the back of the CPI data, with the yield on the 10-year Treasury note last trading at 4.045 per cent.

Thursday’s sell-off is, in part, influenced by tempered expectations surrounding the Federal Reserve’s rate cut timeline as well as earnings jitters, according to CFRA chief investment strategist Sam Stovall. This week is kickstarting the fourth-quarter earnings season, with banking behemoths Bank of America, Wells Fargo and JPMorgan Chase set to report results Friday.
Elsewhere in Thursday’s market, Bitcoin ETFs rose on their first day of trading as crypto prices also edged up. Bitcoin briefly hit the $49,000 mark earlier Thursday before falling to just above $46,000. The moves follow Wednesday’s approved rule changes from the U.S. Securities and Exchange Commission which opened the door for bitcoin exchange-traded funds and expanded investors’ access to the flagship crypto.

Stocks are coming off a winning session, with all three major indexes rising on Wednesday.

Microsoft briefly overtook Apple as the world's most valuable company due to Apple's weak start to the year, reflecting concerns over demand. This shift highlights Microsoft's faster growth and its potential benefits from the generative AI revolution, according to analysts.

Additionally, Hertz's decision to sell a third of its US electric vehicle fleet and reinvest in gas-powered cars signals waning demand for electric cars in the US, while the reliance of mega tech companies like Apple, Amazon, Google, and Nvidia on Taiwanese manufacturers for over 90 per cent of their semiconductor chips poses a key geopolitical risk this year, as noted by Bank of America's Research Investment Committee.

Turning to US sectors, only Tech, Energy and Financials closed higher overnight. Utilities was the worst performer, falling by more than 2 per cent.

Turning to Asian news, the Nikkei 225 index closed above 35,000 for the first time since 1990 and the Topix index ended 1.6 per cent higher, as Japanese shares rallied with a 1.8 per cent gain. Bank of America and Goldman Sachs anticipate further gains in the Japanese stock market, driven by a weakened yen compared to the US dollar, which has bolstered export-related companies such as Hitachi, Toyota Motor, and Sony.

Futures

The SPI futures are pointing to a 0.45 per cent fall.

Currency

One Australian dollar at 9am was buying 66.87 US cents.

Commodities

Gold has gained 0.24 per cent. Silver has lost 0.65 per cent. Copper has gained 0.26 per cent. Oil has gained 1.98 per cent.

Figures around the globe

European markets closed lower yesterday. London’s FTSE lost 0.98 per cent, Frankfurt lost 0.86 per cent, and Paris closed 0.52 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei gained 1.77 per cent, Hong Kong’s Hang Seng gained 1.27 per cent and China’s Shanghai Composite closed 0.31 per cent higher.

Yesterday, the Australian share market closed 0.5 per cent higher at 7,506.03.

Ex-dividends

One company is going ex-dividend. A2B Australia (ASX:A2B) is paying 60 cents fully franked.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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