[New York Stock Market] December PPI Falls Short of Expectations, but Investor Sentiment Remains Unstable...M7 All 'Decline'

Nasdaq 0.23%↓·Dow 0.52%↑

The three major indices of the New York Stock Exchange showed mixed trends. The December U.S. Producer Price Index (PPI) fell short of expectations, but investor sentiment did not significantly recover.

On the 14th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 42,518.28, up 221.16 points (0.52%) from the previous session. The Standard & Poor's 500 Index rose 6.69 points (0.11%) to 5,842.91, while the Nasdaq Composite Index fell 43.71 points (0.23%) to 19,044.39.

By sector, finance, industry, materials, and utilities rose more than 1%. Discretionary consumption, healthcare, technology, and communication services were weak.

On this day, the U.S. Department of Labor announced that the U.S. Producer Price Index (PPI) for December rose 0.2% from the previous month. This was below the expert forecast (0.4%) compiled by Dow Jones. The core PPI for December, excluding volatile food, energy, and trade services, also rose only 0.1% from the previous month, maintaining a slowdown trend. It was the same as the increase rate in November (0.1%) and below the market forecast (0.3%).

A slowdown in inflation is usually seen as a positive sign. This is because the slowdown in inflation (price increase) suggests that the U.S. Federal Reserve (Fed) might lower interest rates. Charlie Ripley, chief investment strategist at Allianz Investment Management, said, "Wholesale prices do not necessarily directly convert to retail prices, but the (December) PPI index recording a much lower figure than expected was encouraging."

After the PPI announcement, stock indices showed strength but did not last long. Although the price increase slowed, there were growing doubts that it might be temporary. It was also pointed out that the U.S. Consumer Price Index (CPI) for December, which will be released on the 15th, needs to be watched.

Andrew Brenner, a strategist at NatAlliance Securities, pointed out, "The PPI figure was much better than expected, but it seems to be a one-time reason due to a significant drop in raw material prices," adding, "Such a trend has already reversed since mid-December."

As inflation concerns were not resolved, the 'Magnificent 7' (M7), referring to seven giant tech companies, all declined. Meta fell more than 2%, and both Tesla and Nvidia dropped more than 1%. Tech stocks are sensitive to interest rate changes. Recently, there was a report that TikTok might sell its U.S. business rights to Elon Musk, CEO of Tesla, but TikTok commented "fiction" and did not comment.

As the prospect of prolonged high interest rates gained momentum, bank stocks were buoyed. The upcoming bank earnings announcement period starting on the 15th also stimulated expectations. This week, JP Morgan, Citigroup, Goldman Sachs, Wells Fargo, Morgan Stanley, and Bank of America will announce their fourth-quarter results.

Utility stocks also showed strength. This was due to the forecast that electricity demand would increase. Constellation Energy rose more than 3%, and Vistra rose more than 5%. On the other hand, Eli Lilly fell more than 6%. The forecast that sales of weight loss drugs would be sluggish weighed on the stock price. Nike also fell nearly 2% on the day, dropping to its lowest level since March 2020.

Jinyoung Gi, Hankyung.com reporter young71@hankyung.com