U.S. stocks open modestly higher in cautious trading ahead of inflation report, bank earnings

What’s driving markets

Inflation and its impact on bond markets and the Federal Reserve’s monetary policy trajectory remains the primary focus for investors — at least until Friday, when some of the big banks will kick off the fourth-quarter 2023 earnings season.

The S&P 500 sits just 40 points, or 0.8%, shy of its record high of 4796.6 touched a little over two years ago, after rallying strongly in the last few months primarily on hopes easing inflation will allow the Fed to lower interest rates in 2024. Ten-year Treasury yields
BX:TMUBMUSD10Y,
the benchmark for borrowing costs, have fallen from 5% in October to 3.994% on Wednesday.

For this bullish narrative to play out inflation must be seen continuing to fall back to the central bank’s 2% target. Great importance is therefore being placed on the consumer price index for December, which will be published at 8:30 a.m. Eastern on Thursday.

Economists forecast that annual headline CPI inflation will inch up from 3.1% in November to 3.2% last month. The core reading, which strips out more volatile items like food and energy, is expected to fall from 4% to 3.8%.

“[E]quities have remained broadly range-bound since just before Christmas, with little to push them in either direction,” said Jim Reid, strategist at Deutsche Bank.

“That might change soon, since we’ve got the U.S. CPI print tomorrow, and then the start of earnings season on Friday, but for now at least, there’s been few headlines for investors to latch onto, just a bit of indigestion after over exuberance before New Year left markets with a little bit of an extended hangover,” Reid added.

U.S. economic updates set for release on Wednesday include wholesale inventories for November at 10. a.m. New York Fed President John Williams will speak in White Plains, NY at 3:15 p.m.

“While near-term [stock market]trends remain bullish from last week as well as bullish from late October of last year, the trend from December has been remarkably range-bound,” said Mark Newton, head of technical strategy at Fundstrat.

“I expect that January should prove positive, but much of this strength might come about in the last week of January…the month might prove to be a bit choppier than either bulls or bears would like in the short run,” Newton added.

Companies in focus

• Shares of Boeing Co. 
  BA,
  +1.38%
  edged up 0.7% on Wednesday after chief executive David Calhoun on Tuesday told employees the jet maker needed to acknowledge its mistakes, after a panel blew off a 737 Max 9 jet flown by Alaska Airlines days earlier, and approach the matter with “complete transparency.” Shares have fallen nearly TK% this week.

• Crypto-related stocks slipped as bitcoin retreated after SEC Chair Gary Gensler denied that the agency had approved spot bitcoin ETFs. Shares of CoinBase Global Inc.
  COIN,
  -4.79%
  fell 2.8%, while the Marathon Digital Holdings Inc.
  MARA,
  -5.56%
  was off 3.8%. Prices of bitcoin
  BTCUSD,
  -1.05%
  dropped to around $45,124 on Wednesday morning.

• Shares of Intuitive Surgical Inc.
  ISRG,
  +5.90%
   rallied 6.6% after the maker of robotic surgical equipment said it expected fourth-quarter sales that were above Wall Street’s expectations, helped by a recovery in China.