U.S. stocks started the day on a positive note following an encouraging inflation report that has eased concerns, at least for the moment, about rising inflation.

According to the Bureau of Labor Statistics, the producer price index (PPI), which gauges wholesale prices, increased by 0.2% in December compared to the previous month. This figure was lower than the average economist prediction of 0.4% from Dow Jones. Additionally, the monthly core rate, which omits the more volatile food and energy prices, remained unchanged.

“PPI helps to remind us that we are still experiencing a phase of stabilizing prices and decreasing rates,” stated David Russell, global head of market strategy at TradeStation, an online trading platform. “It supports the Fed’s decision to ease last year and raises hopes for another rate cut. Additionally, falling food prices are positive news for the incoming Trump Administration.”

As of around 10:30 AM ET, the broad S&P 500 index saw a rise of 0.28%, or 22.32 points, reaching 5,858.54. The blue-chip Dow increased by 0.46%, or 193.63 points, hitting 42,490.75, while the tech-heavy Nasdaq climbed 0.54%, or 102.84 points, to 19,190.94. The yield on the benchmark 10-year Treasury was noted at 4.801%.

Caution regarding inflation persists

Despite the more favorable PPI numbers, economists are cautioning that attention must now turn to consumer inflation, which reflects the costs faced by everyday Americans for goods and services.

“Friday’s surprisingly robust jobs report seems to have shaken the inflation concerns from their slumber,” remarked BeiChen Lin, investment strategist at Russell Investments. “Even a slightly higher than anticipated inflation report could trigger a sell-off in bonds and stocks.”

A strong inflation report might strengthen the case for the Federal Reserve to maintain elevated rates for an extended period, economists warn. Higher rates result in more costly borrowing and can slow economic growth and profits for companies, with inflation eroding returns on bonds.

FactSet reports that, on average, economists expect the annual consumer price index (CPI) in December to be up 2.8%, compared to 2.7% the previous month. The annual core rate is anticipated to stay steady at 3.3%.

Corporate updates

In other developments, prominent U.S. banks like JP Morgan, Wells Fargo, Citigroup, and Goldman Sachs are expected to announce their quarterly earnings on Wednesday. Analysts believe this will provide initial insights into the performance of both companies and consumers. Banks are essential in revealing trends in loan demand, credit card usage, credit quality, and predicting how President-elect Donald Trump’s policies might shape the economy.

• Bitcoin surged, boosting companies like Microstrategy, crypto exchange Coinbase, and miner Riot Platforms. Around 10:25 AM ET, bitcoin had risen by more than 2% to $96,756.04.
• Tesla shares increased nearly 3% following reports that China might allow Elon Musk, the founder of Tesla, to purchase TikTok. The U.S. plans to ban TikTok starting January 19 unless its Beijing-based parent company, ByteDance, sells its stake.
• Eli Lilly’s stock plummeted almost 7% after the company provided a disappointing revenue forecast, attributing it to slower-than-expected sales growth for its weight-loss medications.

Medora Lee is a reporter focusing on money, markets, and personal finance