U.S. stocks edge higher in cautious trading ahead of inflation report, bank earnings

What’s driving markets

Inflation and its impact on bond markets and the Federal Reserve’s monetary-policy trajectory are the primary focus for markets this week as investors remain on hold ahead of Thursday’s December inflation reading and high-profile corporate earnings reports on Friday, when some of the big banks will kick off the fourth-quarter 2023 earnings season.

The S&P 500 sits less than 0.7% shy of its record high of 4796.6 touched a little over two years ago, after rallying strongly in the last few months primarily on hopes that easing inflation will allow the Fed to lower interest rates sooner and faster than the markets previously anticipated.

The yield on the 10-year Treasury
BX:TMUBMUSD10Y,
the benchmark for borrowing costs, has fallen from 5% in October to 4.016% on Wednesday.

But for this bullish narrative to play out, inflation must be seen continuing to fall back to the central bank’s 2% target. That’s why great importance is therefore being placed on the consumer-price index for December, which will be published at 8:30 a.m. Eastern on Thursday.

Economists forecast that annual headline CPI inflation inched up to 3.2% last month from 3.1% in November. The core reading, which strips out more volatile items like food and energy, is expected to fall from 4% to 3.8%.

“[E]quities have remained broadly range-bound since just before Christmas, with little to push them in either direction,” said Jim Reid, strategist at Deutsche Bank.

“That might change soon, since we’ve got the U.S. CPI print tomorrow, and then the start of earnings season on Friday, but for now at least, there’s been few headlines for investors to latch onto, just a bit of indigestion after over exuberance before New Year left markets with a little bit of an extended hangover,” Reid added.

In U.S. economic data, the wholesale inventories declined 0.2% in November, in line with Wall Street expectations, as manufacturers continue to juggle with a fragile economy, according to the Commerce Department.

New York Fed President John Williams will speak in White Plains, N.Y., at 3:15 p.m. Eastern time.

Companies in focus

• Shares of Boeing Co. 
  BA,
  +1.33%
  edged up 1.6% on Wednesday after chief executive David Calhoun on Tuesday told employees the jet maker needed to acknowledge its mistakes after a panel blew off a 737 Max 9 jet flown by Alaska Airlines days earlier, and approach the matter with “complete transparency.” Shares have fallen nearly 7.9% this week.

• Crypto-related stocks slipped as bitcoin retreated after SEC Chair Gary Gensler denied that the agency had approved spot bitcoin ETFs. Shares of CoinBase Global Inc.
  COIN,
  -1.62%
  fell 3%. Prices of bitcoin
  BTCUSD,
  -0.54%
  dropped to around $45,124 on Wednesday morning.

• Shares of Intuitive Surgical Inc.
  ISRG,
  +5.32%
   rallied 5.4% after the maker of robotic surgical equipment said it expected fourth-quarter sales that were above Wall Street’s expectations, helped by a recovery in China.