Market Snapshot: U.S. stocks open higher after more data points to slowing inflation

What’s driving markets

U.S. stock indexes rose after data showed that U.S. wholesale prices slid 0.5% in December, the biggest decline since April 2020, when coronavirus pandemic began. It adds to the evidence that inflation, though still high, may have started to ease.

Meanwhile, December retail sales dropped 1.1%, contracting for the second month in a row. Economists polled by the Wall Street Journal forecasted a decline of 1%.

“The Fed has hit the equivalent of a monetary policy trifecta with the combination of slowing wage growth and moderating consumer and producer price inflation in recent periods,” said Peter Essele, Head of Portfolio Management, Commonwealth Financial Network. “The continued moderation in prices means additional rate hikes in the second half of 2023 are off the table at this point, which suggests the bond party will commence.”

Investors are also focusing on the next batch of U.S. fourth-quarter corporate earnings reports.

U.S. companies reporting on Wednesday include Charles Schwab SCHW, -3.65%, Prologis PLD, +2.70%, PNC PNC, -4.87%, Kinder Morgan KMI, -0.08%, Discover DFS, +0.38% and Alcoa AA, +3.37%.

The S&P 500 index is up 3.95% so far this year on hopes easing inflation will allow the Federal Reserve to be less aggressive in its monetary tightening cycle, making an economic hard landing less likely and thus supporting company earnings.

So far, with 33 of the S&P 500 having reported, 67% of those have beaten profit forecasts, according to Refinitiv. However, high profile disappointments, from the likes of Goldman Sachs on Tuesday, are making it difficult for the S&P 500 to move decisively above the 4,000 level.

“The markets are cheering a better-than-expected PPI reading and worse-than-expected retail sales numbers as more evidence of a soft landing,” said Cliff Hodge, Chief Investment Officer, Cornerstone Wealth. “Investors need to be careful of this view as we’re now seeing signs of the hard data rolling over, following the lead of soft leading indicators. Unemployment is really the last leg standing of the soft landing narrative, which will put even more focus on changes in the labor market going forward.”

In other U.S. economic data, U.S. industrial production fell 0.7% in December in the biggest monthly decline since September 2021.

The NAHB home builders’ index for January is due at 10 a.m. alongside November business inventories.

The Fed is back in focus, too, with its Beige Book of updates on regional economic conditions published at 2 p.m. and Philadelphia Fed President Patrick Harker speaking at 3:15 p.m. followed by Dallas Fed President Lorie Logan making comments at 5 p.m.. All times Eastern.

Companies in focus

• United Airlines UAL, -0.51% rose after reporting quarterly earnings that beat Wall Street’s estimates for the fourth quarter,  saying it managed well the severe winter-weather disruptions in late December, and offered an optimistic view of the current quarter and guidance for full-year 2023.
• Microsoft Corp. MSFT, +0.44% shares edged up 0.4% Wednesday after reports said Tuesday that the company is preparing chop thousands of jobs in engineering and human resources.
• Moderna Inc. MRNA, +7.69% gained 7% after the drugmaker said an experimental vaccine significantly reduced the risk of a viral respiratory disease among older adults in a large clinical trial.
• J.B. Hunt Transport Services Inc. JBHT, +4.69%  shares rose 5.6% Wednesday after the company said it would pay out more than $8.8 million in “appreciation bonuses” to full-time drivers and full-time hourly maintenance and office workers.
• Coinbase Global COIN, +3.79% shares gained 3% Wednesday despite that the company announced it will cease operations in Japan, citing unstable “market conditions” in a blog post.