Stock market today: S&P 500, Nasdaq eye a rebound as futures rise after PPI inflation data

Tue, Jan 14, 2025, 1:14 PM 2 min read

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  New questions emerge over Jamie Dimon’s successor

  Yahoo Finance’s David Hollerith reports:

  JPMorgan Chase (JPM) elevated Jennifer Piepszak to COO as part of a new management reshuffle announced Tuesday. But Piepszak doesn’t want to succeed Jamie Dimon as CEO at the US’s largest bank.

  “Jennifer has made clear her preference for this senior operating role, working closely with Jamie and in support of the top leadership team,” JPMorgan spokesman Joe Evangelisti said, but “going forward, she has said she does not want to be considered for the CEO position at this time.”

  The shake-up adds new uncertainty to the race to succeed 68-year-old Dimon, the longest-serving big bank CEO and the only one left who called the shots during the 2008 financial crisis.

  Piepszak had previously been considered as one of the front runners to get Dimon’s job eventually.

  The view now within the bank is that three other executives — Marianne Lake, Doug Petno and Troy Rohrbough — are the best candidates to become CEO. Piepszak could step in immediately if Dimon had to exit unexpectedly — a contingency referred to within the bank as the “hit by a bus” scenario.

  JPMorgan’s stock was up slightly Tuesday morning. It has climbed 44% over the last 12 months. The bank is expected to set another record for highest full year profits in US banking history when it reports earnings Wednesday morning.

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  Dollar falls after new Trump tariff report: Why it matters

  The US dollar (DX=F, DX-Y.NYB) fell on Tuesday after Bloomberg reported that President-elect Donald Trump could hike tariffs more gradually to combat sticky inflationary pressures.

  The dollar has surged into the new year as investors debate the future under a new administration.

  After hitting a September low, the US Dollar Index — which measures the dollar’s value relative to a basket of the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc — has rallied about 10%. Since the election, it has climbed by over 5%.

  Trump’s proposed policies include high tariffs on imported goods, tax cuts for corporations, and curbs on immigration. Those have led to more bullishness around the dollar, largely due to their protectionist nature.

  Most economists agree the bulk of those policies, especially Trump’s tariff plans, will lead to higher inflation over time and force the Fed to keep rates higher for longer. That means the cycle surrounding bullish dollar sentiment remains intact.

  “Looking ahead, the critical questions are to what extent these moves [in the dollar index] will be validated by the incoming data, and whether they already incorporate our expectations for policy shifts in the coming year, particularly higher tariffs,” Goldman Sachs’ research team, led by analyst Kamakshya Trivedi, wrote in a note on Friday.

  The team predicted the dollar would rise by another 5% over the coming year, noting upside risks are not fully priced in.

  “While we acknowledge that [foreign exchange] market participants are clearly expecting some degree of tariff policy changes, and it is difficult to disentangle the drivers of recent moves, we maintain that there is more dollar strength ahead,” they said.

  That dollar strength could cast a shadow on a wide slice of the S&P 500 this earnings season, since it promises to adversely impact companies that do most of their business overseas. That then leads to slower earnings growth over time due to unfavorable foreign exchange conversions.

  And per FactSet data, S&P 500 (^GSPC) companies with international exposure drove the bulk of earnings growth during the third quarter, a troubling indication that any weakness on the forex front could bleed into overall stock market performance.

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  Homebuilder KBH shares rise as earnings beat amid high mortgage rates

  Shares of KB Home (KBH) rose 4% on Tuesday, a day after the homebuilder posted better-than-expected earnings per share and net orders despite elevated mortgage rates.

  The company reported fourth quarter earnings per share of $2.52, topping Wall Street estimates for $2.44 a share, according to Bloomberg data. Net orders reached 2,688 during the period ending Nov. 30, a 41% gain year over year. That was also above the consensus estimate of 2,554.

  “These results are notable in light of the volatility from shifting mortgage rates that shaped the housing market last year,” CEO Jeffrey Mezger told analysts on the earnings call.

  However, executives noted a shift in demand as “some buyers hesitated on their purchase decisions, particularly in the last 2 months of our quarter” amid rate volatility, Mezger added. Consequently, the builder continued to support buyers by offering mortgage concessions, such as rate buydowns, to secure more deals.

  Looking ahead, KB Home expects a full year gross margin of 20% to 21%, assuming market conditions in 2024 and elevated mortgage rates continue. This means “no significant change in our use of homebuyer concessions to address affordability concerns,” Mezger said.

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  PPI data ‘positive’ for markets but inflation risks still loom

  Wholesale prices rose less than expected in December, calming some fears that a US inflation resurgence is on the horizon.

  “Better-than-expected PPI in December are going to be positive for the markets, which have been concerned with higher inflation readings during the last several months,” Eugenio Aleman, chief economist at Raymond James, wrote in reaction to the report.

  When excluding volatile food and energy categories, the index showed no increase in producer prices last month — a sign of some relief ahead of Wednesday’s critical consumer inflation report.

  “The weakness was broad-based across most components with the exception of energy, where we saw a noticeable increase in gasoline prices last month and some strength in airline pricing,” noted Charlie Ripley, senior investment strategist for Allianz Investment Management.

  Energy prices increased by 3.5% on November levels, the largest monthly increase since February of 2024. Domestic and international airline prices, meanwhile, edged up by 7.2% month over month. Airlines feed directly into the Fed’s preferred core PCE inflation gauge, set for release later this month.

  “We are expecting a wider range of outcomes following tomorrow’s release on the latest consumer price data,” Ripley said.

  Consumer prices for December are expected to remain sticky, with core CPI expected to have risen 3.3% on an annual basis for the fifth straight month. Tariff uncertainty remains a key question for the rest of the year.

  “The proposed increase in tariffs by the incoming administration is adding to inflation concerns,” said Seema Shah, chief global strategist at Principal Asset Management.

  “Estimates range from a one-off 0.5% to 1.5% increase in inflation from increased tariffs alone. Of course, central banks typically look through one-off increases from tariffs — unless it leads to a rise in inflation expectations. Notably, since the election, both market-based and survey-based measures of one- and two-year inflation expectations have risen slightly.”

  Therefore, “the Fed cannot ignore the upside inflation risks facing the US economy,” in Shah’s view.

  “Recent economic strength has combined with a rising threat of tariffs to increase upside inflation risks.”

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  Stocks open higher

  Stocks are in recovery mode after the latest inflation data showed prices rose less than expected last month and investors digested a new report that the Trump administration could hike tariffs more gradually amid the fight to bring down inflation.

  The benchmark S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) each moved about 0.4% higher, while the tech-heavy Nasdaq Composite (^IXIC) climbed roughly 0.6%.

  DJI – Free Realtime Quote • USD

  As of 1:23:06 PM EST. Market Open.

  ^DJI ^IXIC ^GSPC

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  PPI shows wholesale inflation increased less than expected in December

  Wholesale prices rose less than expected in December, a positive sign for the economy amid recent market fears that inflation isn’t falling as quickly as hoped to the Federal Reserve’s 2% target.

  Tuesday’s report from the Bureau of Labor Statistics showed that its producer price index (PPI) — which tracks the price changes companies see — rose 3.3%% from the year prior, up from the 3% seen in November but below the 3.5% increase economists had projected. On a monthly basis, prices increased 0.2%, below the 0.4% increase economists had expected.

  Excluding food and energy, “core” prices increased 3.5% year over year, above November’s 3.4% increase. Economists had expected an increase of 3.8%. Meanwhile, month-over-month core prices were unchanged, below the 0.3% increase economists had expected and the 0.2% increase seen last month.

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  Good morning. Here’s what’s happening today.

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  Goldman Sachs estimates wildfire economic impact

  The Goldman Sachs team said in a note this morning that the combined property losses from the Eaton and Palisades fires are on track to top the single most destructive wildfire (the Camp Fire in 2018) in California history.

  Insured losses are pegged at $10 billion to $30 billion, Goldman estimates.

  Here’s the firm’s estimates on the near-term economic impact: