LIVE MARKETS-S&P 500 futures little changed after cooler-than-expected core CPI

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S&P 500 FUTURES LITTLE CHANGED AFTER COOLER-THAN-EXPECTED CORE CPI

S&P 500 futures and longer-dated yields are little changed after the release of the December Consumer Price Index (CPI).

E-mini S&P 500 futures EScv1 are now roughly flat vs. a loss of around 0.15% just before the data came out. The U.S. 10-Year Treasury Yield US10YT=RR is now around 4.19%. It was around 4.19% just before the numbers came out. The yield ended Monday at 4.187%.

December headline CPI on a month-over-month basis came in at 0.3% vs. a 0.3% estimate and 0.3% last month. The year-over-year print was 2.7% vs. a 2.7% estimate and 2.7% last month. The month-over-month core reading was 0.2% vs. a 0.3% Reuters Poll and 0.2% in the prior month. The year-over-year core number was 2.6% cmopared with the 2.7% estimate and 2.6% last month.

According to the CME's FedWatch Tool, the probability that the Fed sits on its hands and leaves its current target rate of 3.50%-3.75% unchanged at its January 27-28 FOMC meeting is unchanged at 95% vs. just before the data was released. The chance that the FOMC cuts rates by 25 basis points is steady at 5%.

Interest rate probabilities are pricing in a total of 51.9 basis points of cuts through December 2026 which is unchanged vs. just before numbers came out.

A majority of S&P 500 .SPX sector SPDR ETFs are quoted higher in premarket trading. Energy XLE.P, up about 0.7%, is posting the biggest gain. Communication Services XLC.P, off only around 0.2%, is the weakest group.

The SPDR S&P regional banking ETF KRE.P is up about 0.3%. The SPDR Gold Shares GLD.P is down about 0.6%.

Regarding the data, Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said:

"The consumer price index rose 2.7% from a year ago in December. The core index rose 2.6%. Because the government shutdown distorted to the downside the October and November numbers there was a lot of expectation that this report would be distorted to the upside. So much for that idea. The shelter index distortion won’t completely dissipate until spring, but it does look like the inflation curve has bent and is heading towards the Fed’s target instead of away from it."

Jacobsen added, "Yields can rally on this, but the tail wagging the dog of the long-end of the curve is Japan with their long-bond yields rising. Bond investors don’t just have to watch the Fed, they have to watch everything everywhere."

Here is a premarket snapshot from around 8:55 a.m. ET:

(Terence Gabriel, Chuck Mikolajczak)

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