US stocks fluctuate after weak bank and airline earnings

US stocks initially rallied on Friday after the US Producer Price Index (PPI) declined faster than market models predicted, despite Thursday’s CPI showing unexpectedly accelerated consumer inflation in December.

The monthly PPI for December fell by 0.1%, in line with the previous month’s -0.1% decline, missing the median market forecast of a 0.1% rebound. Core PPI figures in December also missed expectations, printing a flat 0.0% to match the previous month while markets were anticipating a 0.2% step up.

Despite an overall fall in Treasury yields, Friday’s large bank profit announcements disappointed, further dampening sentiment. Investors continue to prioritise inflation, with money markets hoping that the CPI increase on Thursday was a one-time event. Traders are factoring in a potential 160 basis point rate decrease from the Federal Reserve by the end of 2024. Airlines let down investors as well, contributing to the index’s problems as travel demand remains weak.

The Standard & Poor’s 500 and NASDAQ Composite both posted slight gains of 0.8% and 0.3% respectively, with the S&P 500 climbing 3.59 points to end Friday at $4,783.83, and the NASDAQ rising 2.57 points to end the trading week at $14,972.76.

The Russell 2000 index fell -0.23% to close at $1,950.96, while the Dow Jones Industrial Average (DJIA) fell nearly 120 points, closing down around three-tenths of a percent to wrap up the trading week at $37,592.98.