Equity Markets Close Mixed Amid Inflation Data and Earnings Expectations
Global equity markets ended mixed on Tuesday as investors evaluated inflation data and prepared for quarterly earnings reports to justify current share valuations. The Dow Jones rose by 0.5%, the S&P 500 edged slightly higher, and the Nasdaq slipped nearly 0.25%.
Producer Price Index Below Expectations
The U.S. Labor Department reported that the Producer Price Index (PPI) rose 3.3% year-over-year in December, slightly below the 3.4% forecast. On a monthly basis, PPI inflation slowed to 0.2%, driven by base effects from lower readings a year ago. The flat services component offered some relief to concerns about elevated consumer services inflation. This data briefly lifted market sentiment.
Market Headwinds Weigh on Optimism
Optimism was dampened after disappointing news from Eli Lilly, whose shares plunged 6.5% following weaker-than-expected fourth-quarter sales of its weight-loss drug, Zepbound. Boeing also weighed on the Dow, declining 2% after reporting its lowest annual deliveries since the pandemic. Concerns about tariffs, interest rates, and inflation further clouded market sentiment.
Bond Yields, Commodities, and Sector Performance
Treasury Yields Hold Near Highs
The 10-year Treasury yield remained above 4.7%, holding close to a 14-month high, despite a slight pullback in bond yields following the inflation data release.
Sector Highlights
- Financial stocks gained ground, with Goldman Sachs rising 1.5% ahead of its earnings report.
- Utilities outperformed, and mid- and small-cap equities led the day’s gains.
- The U.S. dollar weakened against major currencies as markets digested the inflation report.
Oil Prices Decline on U.S. Output Forecasts
WTI crude oil fell to $76.45 per barrel, while Brent crude traded at $79.95. The decline was attributed to forecasts projecting steady global demand alongside rising U.S. output over the next two years. A smaller-than-expected drop in U.S. crude inventories, coupled with rising gasoline and distillate stockpiles, signaled ample supply and tempered demand concerns.
Global Market Insights
European Markets Rebound After Four-Session Losses
European equities ended higher on Tuesday, breaking a four-session losing streak. The Eurozone’s STOXX 50 rose 0.5%, driven by strong performance in banking and tech shares. However, the broader STOXX 600 struggled due to losses in healthcare and consumer defensive sectors, with Sanofi and Novo Nordisk dragging the index lower.
Mixed Performance in Asian Markets
Asian equities saw mixed performance on Wednesday. Japan’s Nikkei 225 rose 0.3%, while China’s CSI 300 declined by 0.2%. Caution prevailed ahead of U.S. inflation data and concerns over limited Federal Reserve rate cuts in 2025.
U.S. Futures Edge Higher
U.S. equities futures inched up on Wednesday as investors awaited the December Consumer Price Index (CPI) report. This report is expected to shape Federal Reserve policy moving forward. Additionally, major financial institutions, including BlackRock and JPMorgan Chase, are set to release their fourth-quarter earnings.
Corporate News and Analyst Ratings
Key Stock Movements
- Eli Lilly: Shares fell 6.6% after reporting weaker-than-expected Q4 revenue of $13.5 billion, driven by softer sales of its weight-loss drugs, Mounjaro and Zepbound. Despite this, analysts at BofA maintained a “Buy” rating, citing strong long-term prospects in the weight-loss drug market with a price target of $997.
- Pfizer: Announced plans to sell approximately 700 million shares, or a 7.7% stake, in Haleon Plc. This divestment aims to raise £2.6 billion ($3.1 billion) to strengthen Pfizer’s financial position.
- Elon Musk: The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Musk, alleging he violated securities laws by failing to disclose his substantial stake in Twitter in a timely manner. This delay allegedly saved him at least $150 million. Musk is also under investigation for potential securities fraud related to his Twitter buyout and Tesla share sales.
- Country Garden: China’s former largest property developer reported a record net loss of 178.4 billion yuan for 2023 and a narrower interim loss of 12.8 billion yuan for the first half of 2024. The company is pursuing a debt restructuring plan to cut its $16.4 billion offshore debt by 70%, as it faces a liquidation petition over a $205 million loan.
- Robinhood: Shares surged 5.5% following positive analyst ratings from Morgan Stanley and Bernstein SocGen, citing regulatory progress and growth potential.
Analyst Downgrades and Upgrades
- Netflix: Barclays raised its price target to $715 but maintained an “Underweight” rating, highlighting concerns over the ad-supported tier and rising costs, which may limit future growth.
- Mercedes-Benz: Goldman Sachs downgraded the stock to “Neutral,” citing risks to luxury vehicle sales and electric vehicle growth. The firm forecasts a 40% drop in earnings for 2024 and further declines in 2025, lowering the price target to €59.
- Northrop Grumman and Lockheed Martin: Truist Securities issued “Buy” ratings for both companies, citing strong growth drivers from U.S. defense spending and NATO programs.
Upcoming Data and Events
Investors are closely watching today’s key data and events, including:
- U.S. CPI Report: Expected to provide insights into inflation trends and influence Federal Reserve policy decisions.
- Major Bank Earnings: JPMorgan Chase and Wells Fargo will release their Q4 results, with expectations of robust performance amid ongoing inflation concerns.
- European Economic Data: Industrial production figures from the Eurozone and inflation rates from the UK will offer further clues about regional economic conditions.
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