By Chuck Mikolajczak
(Reuters) – U.S. stocks rose modestly in choppy trading on Tuesday as investors gauged inflation data and prepared for quarterly earnings reports to bolster stock valuations and the strength of the U.S. economy.
Stocks initially rose after a Labor Department report showed the producer price index rose less than expected in December, but the report failed to affect expectations about the likely path of the Federal Reserve’s monetary policy this year.
Early gains faded and each of the three major indexes fell briefly as investors awaited Wednesday’s consumer price index reading, which will further shape expectations for inflation and the Fed.
“There was some improvement early on, but it shows that there is an inherent level of uncertainty about where rates and the Fed are going,” said Chris Fasciano, chief market strategist at Commonwealth Financial Network.
“Now we will see what tomorrow morning brings,” he said, referring to the CPI report.
It rose by 197.27 points, or 0.47 percent, to 42,495.92, the rose by 17.16 points, or 0.30 percent, to 5,853.64, and by 37.38 points, or 0.20 percent, to 19,125.48.
The market expects a rate cut of about 29 basis points from the Fed by the end of 2025, according to LSEG data, with expectations that a cut of at least 25 bps will not rise above 50% until the June meeting.
Adding to investor caution, US Treasury yields remained at elevated levels, with the benchmark 10-year Treasury yield at 4.797%, holding close to a 14-month high.
Quarterly earnings begin Wednesday with results from major banks, which are expected to post stronger profits, driven by strong dealmaking and trading. The S&P 500 banking index rose 1.3 percent.
The benchmark S&P 500 is trading on estimates well above its historical long-term average and a disappointing earnings season could threaten further gains for stocks.
Healthcare was the worst performer of the 11 major S&P sectors as Eli Lilly (NYSE: ) tumbled 6.7% after forecasting fourth-quarter sales of weight loss drug Zepbound fell short of estimates.
Kansas City Fed President Jeff Schmid said the impact of Trump’s policies was an “active conversation” at the central bank and that it would react if its inflation or employment targets drifted off course.
After rebounding after the US election, stocks have struggled recently, with the S&P 500 falling in four of the previous five weeks as a resilient economy, tough inflation and comments from Fed policymakers fueled concerns that the central bank is less aggressive in cutting interest rates. rate than previously predicted.
Concerns about possible tariffs from the Trump administration that would further fuel inflation are also present.
Boeing (NYSE: ) fell 2% after the planemaker’s annual shipments fell in 2024 to the lowest level since the pandemic.
Advancing issues outnumbered decliners by a ratio of 2.9 to 1 on the NYSE and 1.5 to 1 on the Nasdaq.
The S&P 500 index posted eight new 52-week highs and five new lows, while the Nasdaq Composite posted 34 new highs and 119 new lows.
