U.S. stocks experienced little change on Thursday, marked by mixed economic data that dashed hopes for early interest rate cuts from the Federal Reserve.
The S&P 500 remained essentially flat but inched closer to its all-time high. The Dow Jones Industrial Average dipped marginally, while the Nasdaq Composite edged upwards, reflecting cautious trading amid conflicting messages within the inflation data.
Performance was mixed sector-wise, with the energy and technology sectors managing gains while the remaining 11 major S&P 500 sectors experienced losses. Microsoft briefly dethroned Apple as the world's most valuable company, reflecting the ongoing shift in investor sentiment toward tech stocks.
Meanwhile, in the energy sector, Chesapeake Energy's acquisition by Southwestern Energy sent its stock soaring while its buyer experienced a slight dip.
The market hovered near its record peak on Thursday, reacting to an inflation report that presented mixed signals. While inflation slightly exceeded expectations, indicating a potentially slower cooldown, encouraging trends beneath the surface provided some solace.
Consumer Prices Index (CPI) figures rose more than anticipated last December, driven by increased costs for shelter and healthcare, according to the Labor Department. Separately, jobless claims unexpectedly fell to 202,000 last week, suggesting continued resilience in the labor market.
The headline figure of 3.4 percent inflation for December, higher than November's 3.1 percent, raised concerns about delayed interest rate cuts by the Federal Reserve. However, excluding volatile elements like food and fuel, the underlying inflation trend aligned with economists' forecasts, suggesting a potential downward trajectory, albeit not as smooth as initially anticipated.
Seema Shah, chief global strategist at Principal Asset Management, predicted adjustments in expectations for the timing of the first rate cut, possibly pushing it back from the initially optimistic March timeframe. Nonetheless, the fundamental belief in the gradual deceleration of inflation and the economy steering clear of a severe recession remained intact.
Inflationary pressures
Even with concerns about the rising consumer price data, Cleveland Fed President Loretta Mester argued they did not provide enough evidence to confidently declare inflation on a sustained path back to the central bank's two percent target.
"I think the December CPI report just shows there is more work to do and that work is going to take restrictive monetary policy," Mester told Bloomberg Thursday.
Despite these challenges, Treasury yields dipped slightly, offering some support for equities and preventing a steeper decline. The well-received auction of $21 billion in 30-year bonds alleviated concerns about potential supply issues in the Treasury market.
Other market dynamics
Temporary fluctuations occurred in other markets, with bond yields initially climbing but later stabilizing. The U.S. crude oil prices rose by 2.2 percent to $72.95, adding upward pressure to inflation and yields. On the other hand, Brent crude gained 1.9 percent to $78.24.
The market also witnessed the launch of U.S. spot bitcoin ETFs following regulatory approval, with Bitcoin holding steady above $46,000 per token. At the same time, Ether jumped on speculation that it could be the next cryptocurrency to receive the ETF green light.
Looking ahead, Citigroup's announcement of a $3 billion hit in one-time reserves and expenses in its upcoming quarterly report added to the uncertainty surrounding the current earnings season, which will be crucial for the overall performance of stocks this year.