Stocks Get Some Relief as Data Bode Well for PCE: Markets Wrap

(Bloomberg) — A rally in tech companies propped up stocks and bond yields fell, with traders looking past hot inflation data after some key components signaled the Federal Reserve’s favored price gauge won’t be as bad as feared.

Equities rose, with Tesla Inc. leading gains in megacaps and Cisco Systems Inc. jumping on an upbeat sales forecast. The bond market also shrugged off the increase in the producer price index, with Treasury yields dropping across the curve. The dollar traded well off session lows as President Donald Trump said he will announce reciprocal tariffs at 1 p.m. Washington time.

US wholesale prices rose in January by more than forecast on higher food and energy costs. Economists pay close attention to PPI because several of its components feed into the Fed’s preferred inflation measure — the personal consumption expenditures price index. Those categories were more favorable in January, registering declines in most health care items and in airfares.

“While PPI was much higher than expected, with even higher revisions, the real data that goes into PCE was weaker,” said Andrew Brenner at NatAlliance Securities. “And PCE is the one that Jerome Powell and the Fed look at. So in reality, the numbers are better.”

The S&P 500 rose 0.3%. The Nasdaq 100 added 0.4%. The Dow Jones Industrial Average gained 0.3%.

The yield on 10-year Treasuries fell declined seven basis points to 4.55%. The Bloomberg Dollar Spot Index wavered.

The PPI for final demand climbed 0.4% from a month earlier following an upwardly revised 0.5% increase in December, according to a Bureau of Labor Statistics report released Thursday. The median forecast in a Bloomberg survey of economists called for a 0.3% gain. Compared with a year ago, the PPI increased 3.5%.

“Overall, better news than yesterday on price inflation, but core PCE still comes in well above the 2% target, and the Fed will be braced for bigger increases in PCE in February and March too, repeating what happened last year,” said Paul Ashworth at Capital Economics.

Despite the better outlook for PCE, the latest price reading serves as further evidence that inflation progress has at least stalled — if not in danger of being reversed. Combined with a solid labor market, it will likely keep the Fed on hold for the foreseeable future.

“PPI confirmed yesterday’s hot CPI, and along with another low jobless claims number, we continue to see a picture that doesn’t include Fed rate cuts anytime soon,” said Chris Larkin at E*Trade from Morgan Stanley.

Bearish Trade Looming

A bearish trade is looming for US equities, according to Goldman Sachs Group Inc.’s Scott Rubner.

The market is increasingly crowded and dip-buying is running out of steam, Rubner said. The managing director for global markets and tactical specialist was rightfully bullish heading into 2025, while touting an upcoming negative turn. In a note on Wednesday, he said this was his “last bullish email” for the first quarter.

“Everyone is in the pool, including retail traders, 401k inflows, start of the year allocations, and corporates,” he said. “The flow demand dynamics are quickly changing, and we are approaching negative seasonals.”

Corporate Highlights:

• Apple Inc.’s iPhones will use Alibaba Group Holding Ltd.’s AI technology, the Chinese firm’s chairman said, affirming reports the e-commerce pioneer had scored a coveted role in helping power the iPhone in the world’s top mobile arena.
• Cisco Systems Inc. gave an upbeat sales forecast for the current quarter, helped by companies spending more on computing infrastructure to take advantage of AI technology.
• Deere & Co. slid as the world leader in farm machinery anticipates another challenging year.
• Robinhood Markets Inc. reported revenue that more than doubled as the online trading firm was buoyed by crypto-market transactions around the US presidential election.
• Reddit Inc.’s fourth-quarter user growth missed Wall Street’s expectations, a sign the newly public company is struggling to keep up with larger digital advertising peers Meta Platforms Inc. and Google.
• Barclays Plc shares plunged after the British bank left its earnings guidance for next year unchanged.
• Nestle SA climbed after sales growth at the world’s biggest foodmaker edged up from historically low levels in the final quarter of last year. 

Key events this week:

• Eurozone GDP, Friday
• US retail sales, industrial production, business inventories, Friday
• Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 9:30 a.m. New York time
• The Nasdaq 100 rose 0.4%
• The Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 rose 0.9%
• The MSCI World Index rose 0.4%
• Bloomberg Magnificent 7 Total Return Index rose 0.2%
• The Russell 2000 Index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0385
• The British pound rose 0.2% to $1.2465
• The Japanese yen rose 0.6% to 153.48 per dollar

Cryptocurrencies

• Bitcoin fell 1.7% to $95,999.57
• Ether fell 1.3% to $2,648.63

Bonds

• The yield on 10-year Treasuries declined seven basis points to 4.55%
• Germany’s 10-year yield declined six basis points to 2.42%
• Britain’s 10-year yield declined five basis points to 4.49%

Commodities

• West Texas Intermediate crude fell 0.9% to $70.72 a barrel
• Spot gold rose 0.2% to $2,909.65 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Viljoen, Macarena Muñoz and Winnie Hsu.

©2025 Bloomberg L.P.