Bonds & Stocks
Treasury yields rose and stocks wavered as traders weighed mixed data on US spending and inflation for clues on the Federal Reserve’s next steps. US two-year yields, which are more sensitive to imminent Fed moves, rose four basis points to 4.34%. The S&P 500 struggled for direction after the US benchmark capped a sixth straight day of gains. The tech-heavy Nasdaq 100 underperformed as disappointing forecasts from Intel Corp. and KLA Corp. weighed on chipmakers. The Fed’s preferred gauge of underlying inflation cooled to an almost three-year low — even with robust holiday spending — keeping the debate alive over whether officials will soon cut borrowing costs.
Economy
The Federal Reserve’s preferred gauge of underlying inflation cooled to an almost three-year low even with robust holiday spending, keeping the debate alive over whether officials will soon cut borrowing costs.The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 2.9% in December from a year earlier, according to the Bureau of Economic Analysis. From a month ago, it advanced 0.2%. Inflation-adjusted consumer spending climbed 0.5% in December for a second month, the biggest back-to-back increase in nearly a year. Real disposable income, the main supporter of consumer spending, advanced 0.1%, the smallest in three months.
World
China’s $6 trillion stock market rout reveals a painful truth for President Xi Jinping’s government: People are hopelessly gloomy about the outlook for the world’s second-largest economy, and their pessimism is becoming increasingly hard to ignore. This month’s heavy selloff in China’s benchmark CSI 300 Index brings its plunge to a brutal 40% over the past three years, deepening anguish in a market dominated by mom-and-pop investors. A government rescue package under consideration backed by about 2 trillion yuan ($280 billion) and a sudden bank reserve ratio cut show that authorities are growing anxious to stem the rout.