S&P 500, Nasdaq edge higher after PPI inflation data

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

“A better-than-expected PPI in December would be positive for markets that have been concerned about high inflation over the past few months,” Raymond James chief economist Eugenio Aleman wrote in response to the report.

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

“Weakness was broadly based across most components, with the exception of energy, where we saw a notable increase in gasoline prices last month and some strengthening in airline pricing,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Energy prices rose 3.5% from November, the biggest monthly increase since February 2024. At the same time, domestic and international airline prices rose 7.2% with the preferred core PCE inflation gauge due out later this month.

“We expect a broader range of results following tomorrow’s release of the latest consumer price data,” Ripley said.

December consumer prices are expected to remain firm, with core CPI expected to rise 3.3% for the fifth consecutive month.Tariff uncertainty remains a key issue for the rest of the year.

“The incoming administration’s proposed rate hike adds to inflation concerns,” said Seema Shah, chief global strategist at Principal Asset Management.

“Estimates range from a one-time increase of 0.5% to 1.5% as a result of increased rates. Of course, central banks usually consider one-time rate increases if this does not lead to an increase in inflation expectations both market-based and survey-based indicators of one- and two-year inflation expectations rose slightly.

Therefore, “the Fed cannot ignore the rising inflation risks facing the US economy,” according to Shah.

“Recent economic strength has combined with the growing threat of tariffs to raise inflation risks.”