Markets tiptoed higher Tuesday as traders digested a cooler-than-expected Producer Price report and geared up for today’s much-anticipated consumer inflation data. The S&P 500 gave up early gains but clawed its way back to close in positive territory, inching higher. The tech-heavy Nasdaq dipped, while the Russell 2000 outshone with a robust gain.

⚡ Closing Bell:

• Dow Jones: ⬆️ +0.5% to 42,518.3 (utilities and financials led the charge).

• S&P 500: ⬆️ +0.1% to 5,842.9.

• Nasdaq: ⬇️ -0.1% to 19,044.4 (health care and tech dragged it lower).

• Russell 2000: ⬆️ +1.1%, as small caps continued their quiet comeback.

Producer prices eased more than expected last month, handing the Fed a small win in its inflation fight. With wholesale service costs flat and goods prices easing, policymakers have a touch more breathing room—but Stifel analysts warn it’s not enough to rule out future pivots.

Meanwhile, small business owners are feeling good—really good. Optimism surged to its highest point since October 2018, according to the NFIB, fueled by confidence in the new administration’s pro-business policies. “Expectations for growth and lower inflation are rising,” said NFIB Chief Economist Bill Dunkelberg.

The Sector Shuffle:

• ✅ Winners: Utilities, materials, financials, industrials, and energy all gained more than 1%.

• ❌ Losers: Communication services and healthcare lagged.

Treasury Yields:

• 10-year: ⬇️ -1.5 bps to 4.79%.

• 2-year: ⬇️ -3.5 bps to 4.37%.

❗ What’s next?
Today’s CPI report is the main event, with analysts expecting a 0.4% monthly bump and a 2.9% annual increase. On the radar for traders: earnings from heavyweights like JPMorgan, BlackRock, and Citigroup, plus a peek at Thursday’s jobless claims.

#TRUTH:
❗❗❗ “Start each day with a task completed.” ~ Admiral William H. McRaven

Stock Stories:

Magnificent 7 Falter: All members of the Magnificent 7 closed in the red:

• ❌ Meta (META): ⬇️ -2.28%, as TikTok’s future in the US remains uncertain.

• ❌ Snap (SNAP): ⬇️ -6.67%, taking a hit alongside Meta.

Top Movers:

• ✅ Robinhood (HOOD): ⬆️ +5.48%, jumped after Morgan Stanley and Bernstein recommended the stock, paired with a settlement with the SEC.

• ✅ Rigetti Computing (RGTI): ⬆️ +47.77%, soared after B. Riley boosted its price target.

• ✅ D-Wave Quantum (QBTS): ⬆️ +23.46%, followed Rigetti’s lead in the quantum computing rally.

• ✅ United Rentals (URI): ⬆️ +5.91%, surged on news of a $4.8 billion all-cash deal to acquire H&E Equipment Services.

• ✅ H&E Equipment Services (HEES): ⬆️ +105.48%, soared after the acquisition announcement.

• ✅ Celanese (CE): ⬆️ +5.37%, gained momentum after an upgrade to buy from BofA Securities.

• ❌ Eli Lilly (LLY): ⬇️ -6.58%, worst performer on the S&P 500, missing GLP-1 sales estimates.

• ❌ Boeing (BA): ⬇️ -2.1%, saw its orders and deliveries tumble, dragging the stock lower.

• ❌ GameStop (GME): ⬇️ -10.12%, fell under meme stock pressure.

• ❌ AMC (AMC): ⬇️ -7.55%, also caught in the meme stock sell-off.

Sticky…

December’s Consumer Price Index (CPI) is set to reveal whether inflation is losing steam or sticking around, as markets brace for the Fed’s next move on interest rates. Scheduled for release today, the report is expected to show:

• Headline inflation rising to 2.9% year-over-year (up from November’s 2.7%).

• Monthly prices climbing 0.4% (a slight acceleration from the prior 0.3%).

• Core inflation—which excludes food and energy—holding steady at 3.3%, with monthly increases matching November’s 0.3%.

What’s Driving Prices?
Fuel costs and sticky food inflation are adding to the mix, while rents are expected to nudge up again. Core services like medical care and insurance remain pesky, keeping prices well above the Fed’s 2% target.

The Dilemma… Inflation remains above the Fed’s 2% target, and a resilient labor market complicates matters. While some expect a rate cut later this year, others argue the Fed might hold rates steady—or even hike if inflation expectations climb.

The Trump Effect
The incoming administration’s proposed policies, including tariffs, tax cuts, and immigration restrictions, are seen as potentially inflationary, further muddying the Fed’s path.

What’s Next?
Markets are hedging their bets:

• Odds of a rate cut by June? Around 40%.

• Bank of America? Not so optimistic—predicting no cuts and even hinting at a possible hike if inflation stays sticky.

👀 Today’s CPI report could be the tipping point for the Fed’s next move.

Rise and Fall of Speculative Stocks:

The stock market’s post-election buzz has officially run into … a stop. After a speculative surge fueled by optimism for the incoming Trump administration, high long-term bond yields and tempered expectations have pulled the plug on some of the buzziest names.

Phase 1: The Post-Election Surge

From November 5 to December 6, stocks soared as markets cheered pro-business rhetoric. Volatility and trading activity took center stage, with standouts like:
✅ Palantir (PLTR $65.93, +1.43%),
✅ Tesla (TSLA $396.04, -1.76%), and
✅ Riot Platforms (RIOT $12.23, +4.08%).

Phase 2: The Speculative High

After December 6, while the S&P 500 plateaued, tech-focused segments roared.

• Quantum computing stocks like Rigetti (RGTI $9.18, +47.77%) and D-Wave (QBTS $5.15, +23.46%) surged over 80%.

• Smaller AI players, like SoundHound AI (SOUN $12.96, -0.08%), jumped triple digits.

Even SEALSQ, touting quantum-resistant tech, spiked a staggering 1,840%, epitomizing the speculative frenzy.

Phase 3: The Buzzkill

The rally’s euphoria has faded. Since January 7, speculative stocks have been slammed:
❌ Meme stocks like GameStop (GME $27.91, -10.12%) and AMC (AMC $3.30, -7.55%) cratered.
❌ Quantum players reversed course, partially spurred by Nvidia’s tempered outlook.
❌ Plug Power (PLUG $2.68, -1.66%) and other speculative favorites couldn’t hold their ground.

Retail investors’ dip-buying enthusiasm, are now being outpaced by institutional selloffs. Volatility and trading activity have sunk to the bottom of performance metrics as the speculative shine continues to wear off.

As institutional divestments cascade, even once “immune” sectors are feeling the heat, signaling a market grappling with recalibration and fading speculative optimism.

Banks Gear Up to Power S&P 500:

Q4 earnings season is about to kick off, and analysts are calling for a blockbuster quarter for the S&P 500, with profits expected to climb 11% from a year ago, per FactSet. The show starts tomorrow, led by JPMorgan (JPM $247.29, +1.27%) and Goldman Sachs (GS $577.00, +1.49%).

Why the excitement? Financials are set to do the heavy lifting, contributing nearly 40% of the growth. Last year’s Q4 results were dragged down by massive FDIC fees tied to the collapses of Silicon Valley Bank and First Republic, making this year’s numbers look extra shiny in comparison.

But it’s not just banks:

• Meta (META $595.55, -2.28%) and Alphabet (GOOGL $190.28, -0.72%) are boosting the communications services sector, with EPS expected to jump 25% and 30%, respectively.

• Over in tech, Nvidia (NVDA $131.29, -1.04%) is leading the charge, with EPS forecast to soar more than 60%.

With financials driving the momentum and tech adding fuel, Q4 could be a major win for the S&P 500. Stay tuned—the action starts tomorrow.

Same Playlist:

Bitcoin and the Nasdaq are moving closer than ever, with their correlation hitting a two-year high. As today’s CPI report takes the spotlight, the crypto market could be in for a ride, mirroring how tech reacts to the latest inflation data.

Trading at $97,000 this morning—still $11,300 off last month’s high—Bitcoin, like tech stocks, remains under pressure. Rising bond yields and a stronger dollar have dampened the risk-on mood.

Inflation’s Grip
If inflation stays stubborn, the Federal Reserve could hold rates higher for longer, keeping both Bitcoin and tech in the hot seat. On the horizon? President-elect Trump’s inauguration, with potential inflationary policies like tariffs looming large.

Commodities Check: ✔️

• WTI crude oil ⬇️ dipped 1.3% to $77.80 per barrel, weighed down by demand concerns.

• Gold ⬆️ gained 0.5% to $2,691.80 per troy ounce.

• Silver ⬆️ climbed 0.8% to $30.55 per ounce.
  

The Dollar:

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The stinger

Disclaimer

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