From the StockResearch AI Team

Stocks Finish Higher as Major Indexes Push to New Records

U.S. stocks finished higher yesterday, reversing early-morning weakness and closing near the highs of the session. In the process, nearly all major indexes notched new all-time highs, while the Nasdaq posted a fresh year-to-date high.

The rally was supported by continued positive sentiment following last week’s employment report. December payrolls rose by 50,000, slightly below the 55,000 consensus estimate. That outcome reinforced the view that the economy remains resilient, yet soft enough—especially when factoring in downward revisions to prior months—to keep the Federal Reserve focused on downside risks in the labor market. This combination continues to fuel expectations that the Fed could deliver another rate cut earlier this year, potentially as soon as March.

While labor market conditions have recently taken center stage, the Fed remains guided by its dual mandate: maximum employment and price stability.

That brings today’s key data point. This morning (Tuesday, 1/13), we’ll get the December Consumer Price Index (CPI), which measures retail inflation. Consensus expectations call for a 0.3% month-over-month increase, up from November’s 0.2%. On a year-over-year basis, CPI is projected at 2.6%, slightly below last month’s 2.7%. Core CPI (excluding food and energy) is expected to rise 0.3% month over month versus 0.2% previously, with the annual rate forecast at 2.7%, compared with 2.6% last month.

On Wednesday, attention will turn to the Producer Price Index (PPI), which tracks wholesale inflation—but first, today’s CPI will set the tone.

Markets largely shrugged off headlines that the Department of Justice is investigating Federal Reserve Chair Jerome Powell related to testimony about Federal Reserve building renovations. Chair Powell released a statement and video asserting that the investigation is a pretext tied to pressure to alter monetary policy. The President has stated he does not intend to remove Powell, whose term expires in roughly four and a half months, and indicated this was the first he had heard of the investigation. Former Fed Chairs Janet Yellen, Ben Bernanke, and Alan Greenspan publicly defended Powell and reaffirmed the importance of Fed independence.

Geopolitical developments also drew attention after the close. President Trump announced plans to impose a 25% tariff on any country doing business with Iran. The move follows U.S. warnings over Iran’s violent suppression of anti-government protests, reportedly resulting in approximately 2,000 deaths. While the U.S. continues to weigh potential responses, Iran has reportedly reached out regarding negotiations, even as rhetoric between the two sides intensifies.

Looking ahead, fourth-quarter earnings season officially kicks off next week, though reports are already beginning to roll in. Today brings results from several major financial institutions and a large airline, with more big banks set to report midweek. Later in the week, earnings from leading investment banks, asset managers, and a major global semiconductor manufacturer will take center stage.

Earnings season is historically a constructive period for equities, and expectations remain optimistic this time around.

For now, stocks are off to a strong start to the year—and the market’s momentum remains firmly intact.