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Markets pulled back on Tuesday as investors remained cautious ahead of Wednesday's crucial Consumer Price Index (CPI) report, despite encouraging Producer Price Index (PPI) data showing unexpected cooling in wholesale prices. The S&P 500 declined 0.3%, while the tech-heavy Nasdaq 100 fell 0.4% and the Dow Jones Industrial Average dropped 0.2%.
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Core PPI for December came in at 3.5% year-over-year, below the forecast of 3.8%, while the monthly figure showed no change versus an expected 0.3% increase. The data helped temper immediate inflation concerns but wasn't enough to spark a sustained rally as markets remained focused on tomorrow's CPI report.
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In corporate news, Eli Lilly shares sank 7% after forecasting 2024 revenue below expectations, despite strong sales of its weight-loss drugs. Boeing continued its downward spiral, dropping 2.8% after reporting its lowest jet deliveries since the pandemic. The "Magnificent Seven" megacaps collectively declined 0.8%.
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The currency markets saw interesting movement as the dollar index fell nearly 0.3% following reports that Donald Trump's incoming economic team is considering gradual tariff increases to avoid inflation shocks. Treasury yields remained elevated, with the 10-year note climbing two basis points to 4.80%.
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In the commodities space, oil prices edged lower by 0.5% amid reports of potential progress on Gaza ceasefire negotiations.
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The cryptocurrency market showed resilience, with Bitcoin gaining 2% to reach $96,100 and Ethereum rising 2.3% to $3,200.
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Looking ahead, Wednesday's CPI report takes center stage, with options traders preparing for the S&P 500's most volatile CPI day since March 2023. The market expects a 1% move in either direction, according to Citigroup analysis. Additionally, major banks including JPMorgan Chase and Wells Fargo will kick off the earnings season, with investors particularly focused on net interest income trends.
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In the technology sector, AMD continues to face pressure, trading nearly 50% below its 2023 peaks as analysts express concerns about AI-related growth prospects. Meanwhile, Hershey touched 52-week lows as rising cocoa prices and consumer spending concerns weigh on the confectionary giant.
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The market remains in a holding pattern as investors await clarity on inflation trends and their implications for Federal Reserve policy, with current data suggesting the Fed may maintain its cautious approach to rate cuts in the near term.
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