S&P 500, Nasdaq see rebound as stocks rise after PPI inflation data

Wholesale prices rose less than expected in December, calming some fears that a resurgence of inflation is on the horizon.

“Better-than-expected December PPI will be positive for markets, which have been concerned about higher inflation readings over the past several months,” wrote Eugenio Aleman, chief economist at Raymond James in response to the report.

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

“Weakness was broad-based across most components with the exception of energy, where we saw a noticeable increase in gasoline prices last month and some strength in airline prices,” noted Charlie Ripley, senior investment strategist for Allianz Investment Management.

Energy prices rose 3.5% month-on-month, the biggest monthly increase since February 2024. Meanwhile, domestic and international airline fares rose 7.2% month-on-month. Airlines feed directly into the Fed’s preferred core PCE inflation gauge, set for release later this month.

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

Consumer prices are expected to remain sticky, and core CPI is expected to have risen 3.3% year-on-year for the fifth month in a row. Tax uncertainty also remains a key issue for the rest of the year.

“The proposed hike in tariffs by the incoming administration adds to inflation concerns,” said Seema Shah, global chief strategist at Principal Asset Management.

“Estimates range from a one-time increase of 0.5% to 1.5% in inflation from increased tariffs alone. Of course, central banks typically see through one-time increases from tariffs – unless it leads to a rise in inflation expectations. elections, both market-based and survey-based measures of one- and two-year inflation expectations increased slightly.”

Therefore, “the Fed cannot ignore the upside inflation risks facing the US economy,” in Shah’s view.

“Recent economic strength has combined with a rising threat of tariffs to increase upside inflation risks.”