Stocks ended higher Tuesday, but pared earlier gains following reports that Russian missiles crossed into NATO member Poland, killing two people.
Russia’s Defense Ministry denied targeting the border, CNN reported, and called the reports by Polish media “a deliberate provocation in order to escalate the situation."
The Commerce Department said producer price inflation slowed to 8% last month, well south of the Street consensus forecast and more than three percentage points lower than the multi-decade highs reached in March of this year.
The PPI data, which followed a muted reading of consumer price inflation last week, may trigger further discussions as to whether inflation has peaked in the world's biggest economy.
The bullish sentiment was supported by stronger-than-expected third quarter earnings from Walmart (WMT), which also trimmed its forecast for an expected profit decline over the final three months of the year, as well as Home Depot (HD), which was able to increase sales and profits despite the ongoing downturn in the housing market.
The Tuesday data followed a pullback in stocks last night amid comments from Federal Reserve Vice Chair Lael Brainard that suggested a near-term slowing in the central bank's rate path while still cautioning that inflation rates remain far too elevated.
Her remarks, building on a hawkish set of comments from Fed Governor Christopher Waller in Australia, suggest markets remain acutely sensitive to any change in tact from policymakers in Washington heading into the Fed's December meeting.
"The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. "Although we should all keep in mind that Fed speak is pretty disparate at the moment and you can get a hawkish or dovish point of view depending on which official you ask," he added.
"The market is also digesting just how much inflation is affecting the consumer, with key retail earnings beating expectations this morning and retail sales coming tomorrow."
At present, the CME Group's FedWatch suggests an 80.6% chance of a 50 basis point rate hike next month, with the odds of another 75 basis point increase - which would be the fifth in succession -- pegged at 19.4%.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.15% lower at 106.50 following the PPI data while benchmark 10-year Treasury note yields fell 7 basis points to 3.82%, in New York trading, while 2-year notes slipped to 4.391%.
This week's focus on retail sales and consumer strength, as evidenced by October quarter updates from Home Depot and Walmart today, Target (TGT) and Lowe's (LOW) tomorrow and retail sales from the Commerce Department on Thursday, will likely add another layer of complexity onto stocks before the end of the week.
Investors will also focus on the final throes of the third quarter earnings season this week, with updates from 15 S&P 500 companies between now and Friday. With around 460 reporting so far, collective profits are expected to rise 4.1% from last year to $462.8 billion, thanks in large part to forecast-busting gains from the energy sector.
Looking into the final months of the year, however, earnings are likely to fall 0.1% from their 2021 levels to a share-weighted $456.7 billion, according to data from Refinitiv.
The S&P 500 ended 0.87% higher while the Dow Jones Industrial Average gained 56 points, or 0.17%, to 33,593, The tech-focused Nasdaq ended up 1.45%.
In overseas markets, Asia stocks were firmly higher, rising on the back of a relatively promising meeting on the G20 sidelines between President Joe Biden and China President Xi Jinping, as well as hopes that officials in Beijing would further loosen Covid restrictions in the world's second largest economy following disappointing October data on industrial output and retail sales.
The region-wide MSCI-ex Japan index was marked 2.36% higher heading into the close of trading, while in Europe the Stoxx 600 ended 0.46% higher by the close of trading in Frankfurt.
