Stock Rally Shows Signs of Fatigue Before CPI Data: Markets Wrap

(Bloomberg) — A rally that drove stocks to a series of all-time highs struggled to gain much traction, with traders awaiting key inflation data and more clues on Donald Trump’s transition to presidency.

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Equities wavered after the S&P 500’s biggest five-day run in a year. Following sizable post-election gains, small caps and banks lost some ground. Bitcoin fell after a record-breaking surge that took the digital asset close to $90,000. The dollar headed toward its highest since November 2022. Treasury yields climbed as investors prepared for data to show a slight pickup in consumer prices.

The post-election advance in US stocks could run out of steam as investors start to take profits, according to strategists at Citigroup Inc. led by Chris Montagu. Investor exposure to US stocks jumped to the highest since 2013 after the presidential vote amid optimism around stronger economic growth, according to a survey from Bank of America Corp.

“We are on watch for potential profit taking, consolidation, or even correction for US equities heading into the first quarter of the new year,” said Dan Wantrobski at Janney Montgomery Scott. “Upward momentum remains strong and investor sentiment favorable (pushing toward extremes again), but stocks are once again overbought/extended across multiple timeframes.”

The S&P 500 was little changed. The Nasdaq 100 wavered. The Dow Jones Industrial Average fell 0.2%. The Russell 2000 slid 0.4%.

Treasury 10-year yields advanced seven basis points to 4.38%. The Bloomberg Dollar Spot Index rose 0.4%.

In the wake of the big post-election advance, traders are gearing up for the key consumer price index. US inflation probably moved sideways at best in October, highlighting the uneven path of easing price pressures in the home stretch toward the Federal Reserve’s target.

The core CPI likely rose at the same pace on both a monthly and annual basis compared to September’s readings. The overall CPI probably increased 0.2% for a fourth month, while the year-over-year measure is projected to have accelerated for the first time since March.

“We expect very weak levels of support and resistance for Treasuries this week as a few big data releases and more clarity on the president-elect’s policy plans give the potential to meaningfully alter recent trading ranges,” said Will Compernolle at FHN Financial. “A hot CPI and/or strong retail spending could push yields on 2s above 4.45% if a December rate cut starts looking imprudent.”

Traders in the swap market expect the Fed to deliver another quarter-point cut either in December or January, with a 60% chance of that happening this year. They have pared bets on the scope for future reductions, pricing 10 basis points fewer cuts two years ahead.

Corporate Highlights:

Qualcomm Inc. Chief Executive Officer Cristiano Amon said the artificial intelligence boom won’t lead to a global chip shortage similar to what happened during the pandemic, even with demand for AI-enabled smartphones rising.
Apple Inc. was notified by the European Union that its geo-blocking practices are potentially in breach of consumer protection rules, adding to the iPhone maker’s regulatory issues in the bloc.
Home Depot Inc. lifted its forecast of a key sales metric for the year after adverse weather propped up demand for home-improvement materials in the latest quarter.
Elliott Investment Management has built a $5 billion-plus position in Honeywell International Inc. and is pushing the industrials giant to pursue a break up.
Tyson Foods Inc. beat fourth-quarter earnings and projecting stronger results next year, with a turnaround in its chicken business offsetting losses in beef.
Hertz Global Holdings Inc. reported a worse-than-expected loss stemming from the rental-car company’s effort to unwind a failed bet on electric vehicles that has pummeled earnings for most of the past year.
Shopify Inc. reported third-quarter sales that beat analysts’ estimates, a sign that the Canadian e-commerce company is gaining momentum as spending continues to shift from stores to websites.
Bayer AG tumbled after the German conglomerate lowered profit guidance for this year and said earnings will probably fall in 2025.

Key events this week:

Eurozone industrial production, Wednesday
US CPI, Wednesday
Fed speakers include Jeffrey Schmid, Lorie Logan, Neel Kashkari and Alberto Musalem, Wednesday
Eurozone GDP, Thursday
US PPI, jobless claims, Thursday
Walt Disney earnings, Thursday
Fed speakers include Jerome Powell, John Williams and Adriana Kugler, Thursday
China retail sales, industrial production, Friday
US retail sales, Empire manufacturing, industrial production, Friday

Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 10:15 a.m. New York time
The Nasdaq 100 was little changed
The Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 fell 1.6%
The MSCI World Index fell 0.3%
Bloomberg Magnificent 7 Total Return Index was little changed
KBW Bank Index was little changed
The Russell 2000 Index fell 0.4%

Currencies

The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.4% to $1.0612
The British pound fell 0.7% to $1.2778
The Japanese yen fell 0.5% to 154.47 per dollar

Cryptocurrencies

Bitcoin fell 0.6% to $87,471.18
Ether fell 1.3% to $3,285.43

Bonds

The yield on 10-year Treasuries advanced seven basis points to 4.38%
Germany’s 10-year yield was little changed at 2.33%
Britain’s 10-year yield advanced four basis points to 4.46%

Commodities

West Texas Intermediate crude rose 1% to $68.70 a barrel
Spot gold fell 0.4% to $2,609.14 an ounce

This story was produced with the assistance of Bloomberg Automation.