Finally, investors received economic data that supports potential Federal Reserve rate cuts later this year. The producer price index, a gauge of wholesale prices, rose 0.2% in December. Economists polled by Dow Jones had expected an increase of 0.4%. So-called core PPI, which strips out food and energy prices, was flat versus a consensus estimate calling for a 0.3% gain. The report comes after a spate of data pointing to stronger price pressures that might limit the Fed’s ability to lower interest rates in 2025. Despite Tuesday’s encouraging release, some on Wall Street still advise caution: Peter Boockvar, chief investment officer at Bleakley Financial Group: “Interestingly, notwithstanding the headline and core miss, inflation breakevens are unchanged and nominal yields after initially falling, are back to flat on the day. Maybe the reason is because CPI matters so much more to markets than PPI or the [year over year] figures are being focused on instead and that remain above 2% still.” Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America , on CNBC’s ” Squawk Box “: “I think we’re in a murky territory here. We took all Fed cuts off the table. … Our economists are basically of the opinion that we don’t get to the numbers that we need to see in terms of … actual inflationary measures coming down to levels that the Fed would be comfortable with. I think we could see a bit of a reflation cycle in the first half of this year.” Andrew Brenner of NatAlliance Securities : “PPI numbers were much better than expected but the reasons behind it seem to be one off, with a big drop in raw materials, which has already reversed since mid December.” Others, such as SWBC Investment Services chief investment officer Chris Brigati, were more constructive. “Tuesday’s PPI print came in below expectations, which is stock market friendly, because it helps to calm fears that we were on the verge of an inflation acceleration,” he said in a note. All eyes on Wall Street now turn to Wednesday’s consumer price index report, the more followed report of the two. If that number shows persistent inflation, any progress made Tuesday could be wiped out. Elsewhere on Wall Street on Tuesday morning, Goldman Sachs upgraded lidar stock Hesai to buy from neutral, calling for nearly 35% upside. Lidar is a detection system similar to radar but which uses laser light. “We believe Hesai is well-positioned to benefit from China [new energy vehicle] market’s NOA (navigation on autopilot) adoption acceleration starting from 2025E, together with the launch of lower-cost products, to drive LiDAR usage by mass-market vehicle models,” Goldman said.
