Stock Rally Shows Signs of Fatigue Before CPI Data: Markets Wrap
(Bloomberg) — A rally that drove stocks to a series of all-time highs struggled to gain much traction, with traders awaiting key inflation data and more clues on Donald Trump’s transition to presidency.
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Equities wavered after the S&P 500’s biggest five-day run in a year. Following sizable post-election gains, small caps and banks lost some ground. Bitcoin fell after a record-breaking surge that took the digital asset close to $90,000. The dollar headed toward its highest since November 2022. Treasury yields climbed as investors prepared for data to show a slight pickup in consumer prices.
The post-election advance in US stocks could run out of steam as investors start to take profits, according to strategists at Citigroup Inc. led by Chris Montagu. Investor exposure to US stocks jumped to the highest since 2013 after the presidential vote amid optimism around stronger economic growth, according to a survey from Bank of America Corp.
“We are on watch for potential profit taking, consolidation, or even correction for US equities heading into the first quarter of the new year,” said Dan Wantrobski at Janney Montgomery Scott. “Upward momentum remains strong and investor sentiment favorable (pushing toward extremes again), but stocks are once again overbought/extended across multiple timeframes.”
The S&P 500 was little changed. The Nasdaq 100 wavered. The Dow Jones Industrial Average fell 0.2%. The Russell 2000 slid 0.4%.
Treasury 10-year yields advanced seven basis points to 4.38%. The Bloomberg Dollar Spot Index rose 0.4%.
In the wake of the big post-election advance, traders are gearing up for the key consumer price index. US inflation probably moved sideways at best in October, highlighting the uneven path of easing price pressures in the home stretch toward the Federal Reserve’s target.
The core CPI likely rose at the same pace on both a monthly and annual basis compared to September’s readings. The overall CPI probably increased 0.2% for a fourth month, while the year-over-year measure is projected to have accelerated for the first time since March.
“We expect very weak levels of support and resistance for Treasuries this week as a few big data releases and more clarity on the president-elect’s policy plans give the potential to meaningfully alter recent trading ranges,” said Will Compernolle at FHN Financial. “A hot CPI and/or strong retail spending could push yields on 2s above 4.45% if a December rate cut starts looking imprudent.”
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