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U.S. markets rose, expecting inflation to moderate further. They might be surprised by tomorrow's consumer price index.
What you need to know today
- Economists expect January's consumer price index report to show a 0.4% month-on-month increase and 6.2% annual growth. But there are warning signs that the number could be higher. Price pressures in the supply chain, for one, have been rising lately.
- U.S. stocks rose Monday, with the Dow Jones Industrial Average registering its best day in February. Asia-Pacific shares mostly traded higher on Tuesday too. Japan's Nikkei 225 rose 0.67% after the country reportedly nominated Kazuo Ueda as the new Bank of Japan governor.
- Ford Motor announced Monday that it will work with a Chinese supplier on a new $3.5 billion battery plant for electric vehicles. The facility will be built in Michigan and is expected to open in 2026.
- Chinese technology companies are launching their own competitors to artificial intelligence chatbot ChatGPT. But they are limiting the scope of their chatbots to ensure the government's internet regulatory rules aren't bypassed.
- PRO If Tuesday's consumer price index report comes hotter than expected, the S&P 500 could plummet up to 3%, according to JPMorgan's sales and trading desk.
The bottom line
Money Report
Months of steadily declining prices have given investors the sense that inflation is on a linear, downward trend. But inflation is more complex than it initially seemed and could surprise markets still.
Economists are expecting January's consumer price index to rise 0.4% on a monthly basis — that's a jump from December's -0.1% figure, which means that prices actually fell. So far, market chatter is that service inflation — the price of travel, dining out and hospitality, for example — has proven more persistent than goods inflation, largely because of an extremely tight labor market.
But logistic managers are warning that the supply chain is clogging up again, which could contribute to higher prices for goods. "Late fees and warehouse fees are passed onto the consumer, which is why we are not seeing products fall as much as they should," said Paul Brashier, vice president of drayage and intermodal for ITS Logistics.
Nonetheless, markets showed optimism on Monday. The Dow rose 1.11%, the S&P 500 climbed 1.14% and the Nasdaq Composite advanced 1.48%. Investors may have been hoping for a "Goldilocks-like mix of industrial production recovery and falling inflation," said Ray Farris of Credit Suisse in a Monday note. Time will tell if that comfortable narrative of disinflation — and the defiant optimism in the markets — hold up.
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