Cooling Off | January 17th, 2024

In the past week, stocks saw a modest increase due to lower bond yields driven by tame inflation reports, boosting investor confidence in potential Fed interest rate cuts. The Producer Price Index (PPI) fell 0.1% in December, primarily driven by reduced costs for goods like diesel fuel and food. While the Consumer Price Index (CPI) showed a 0.3% monthly increase, concerns arise about potential overstatement, especially in the "owners’ equivalent rent" component. Despite a tepid start to earnings season, major banks reported mixed results, with trends indicating rising credit card delinquencies and commercial real estate losses. Geopolitical tensions and a more hawkish tone from central bankers are dampening investor enthusiasm at the beginning of the week, with attention turning to the Energy sector amid Middle East unrest. The economic calendar for the upcoming week includes retail sales and consumer sentiment reports, supporting a slow and steady narrative.

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