US stocks were little changed on Tuesday as investors digested a slightly cooler inflation report and weighed the first wave of fourth-quarter corporate earnings.
The S&P 500 edged up 0.1%, while the Dow Jones Industrial Average slipped by 35 points.
The Nasdaq Composite hovered around the flatline, reflecting a cautious tone across equity markets.
Tuesday’s muted moves followed a record-setting session on Monday, when both the S&P 500 and the Dow closed at all-time highs.
Investors largely looked past the Department of Justice’s criminal investigation into Federal Reserve Chair Jerome Powell, focusing instead on resilient economic data and expectations for continued earnings growth.
The Russell 2000 index of small-cap stocks also reached an all-time high in the prior session, underscoring the broad strength in equities.
Inflation data offers modest relief
Stocks initially found support after the December consumer price index showed underlying inflation rose less than economists had expected.
Core CPI, which excludes volatile food and energy prices, increased 0.2% on the month and 2.6% on a year-over-year basis, according to data released Tuesday by the Bureau of Labor Statistics.
Economists polled by Dow Jones had forecast monthly and annual increases of 0.3% and 2.8%, respectively.
Headline inflation was firmer but matched expectations. The all-items CPI rose 0.3% in December, putting the annual inflation rate at 2.7%, in line with forecasts.
While Federal Reserve officials consider both measures, core inflation is generally viewed as a better indicator of longer-term price trends.
The softer-than-expected core reading reinforced hopes that inflation pressures are gradually easing, even if they remain above the central bank’s 2% target.
Other components of the report pointed to continued pockets of price pressure.
Food prices jumped 0.7% on the month, though egg prices fell sharply, declining 8.2% in December and nearly 21% from a year earlier after surging earlier in the year. Recreation, airfares, and medical care costs also recorded increases.
Fed expectations remain cautious
The inflation data followed last week’s December jobs report, which showed a labour market that was softer but still stable.
Together, the reports are seen as reinforcing expectations that the Federal Reserve will hold off on cutting interest rates at its first policy meeting of the year later this month.
Fed funds futures are currently pricing in two quarter-point rate cuts this year, beginning in June, according to the CME FedWatch Tool.
Policymakers have signalled they want clearer evidence that inflation is moving sustainably towardthe target before easing further.
Earnings season gets underway
Investors are also turning their attention to corporate profits as fourth-quarter earnings season begins.
Shares of JPMorgan Chase swung between gains and losses after the bank reported results that topped expectations for the December quarter.
Despite the beat, the stock struggled to find a clear direction as investors assessed the outlook for lending, trading, and consumer activity in the year ahead.
In contrast, Delta Air Lines fell more than 1% after posting mixed results, highlighting uneven demand trends and cost pressures within the airline industry.
Several other major financial institutions, including Bank of America, Citigroup, and Morgan Stanley, are scheduled to report later this week, with their results expected to provide further insight into consumer spending, capital markets activity, and credit conditions.
The post US stocks hover near the flatline as inflation showed signs of cooling appeared first on Invezz
