Stock Market Update - January 14, 2025 Today's market showed mixed results, bolstered by a cooler-than-expected PPI report. The CPI report is set for release tomorrow at 8:30 AM, with economists forecasting a 2.8% year-over-year increase. The S&P 500 (SPX) edged up slightly, while the Russell 2000 (RUT) rose by 1.1%. The Dow Jones Industrial Average (DJIA) increased by 0.5%, but the Nasdaq Composite fell by 0.25%. Earnings season kicks off tomorrow, with major banks like JPMorgan, Goldman Sachs, and Citigroup expected to drive volatility before the market opens.
SPX options suggest an expected movement of about 1.1% for tomorrow, which is significantly higher than the average daily movement of 0.5%. This indicates increased uncertainty and potential fluctuations in the market.
Away From Stocks: In fixed income, the long bond briefly tested the 5% yield level intraday before settling slightly lower at 4.98%. Meanwhile, the broader Treasury complex displayed a firmer tone, with the two-year yield easing three basis points to 4.37%. In commodities, WTI crude oil slipped below $78 per barrel, extending its recent softness, while gold climbed higher, reaching $2,677 per ounce. Bitcoin continued to hover near $96,500, maintaining its recent range-bound behavior, and the CBOE Volatility Index (VIX) edged below 19, signaling tempered market volatility.

A change in the market has been is occurring since the last FOMC meeting in December 18, 2024: stocks are now moving in the opposite direction of bonds. This means that when bond yields go up, stock prices go down, and vice versa. Let’s break this down further.
In times of positive correlation between the S&P 500 and 10-year Treasury yields rising yields are associated with rising stock prices. Historically, this happens when good economic news boosts both stock performance and bond yields. We saw this pattern in early 2023 and late 2024.
On the other hand, during periods of negative correlation the relationship reverses. For stocks to rise, bond yields must fall. This is a "bad news is good news" scenario, where weaker economic data or lower inflation expectations lead to lower yields, which helps lift stock prices. Currently, the market seems to have shifted back to this negative correlation, suggesting that lower yields will be needed to support stock market gains.
1. **Inflation Data (CPI) Expectations**: The upcoming Consumer Price Index (CPI) report is expected to meet consensus forecasts, predicting a 0.26% increase month-over-month. If this occurs, it would be the lowest monthly inflation rate since July 2024, indicating that inflation pressures are easing. Lower inflation reduces the chances of further interest rate hikes, which could lower yields—benefiting stocks.
2. **Strong Earnings Without Inflation Risks**: Corporate earnings reports this week are anticipated to be strong, reflecting a resilient economy. Importantly, robust earnings do not necessarily mean inflation risks are rising, potentially allowing the market to rally without increasing yields. A significant number of companies will report their results on Wednesday, which could act as a catalyst for the market.
Tomorrow Macro News:
1/15 8:30 AM:
Dec CPI m/m: 0.4 (Previous: 0.3)
Dec Core CPI m/m: 0.3 (Previous: 0.3)
Dec CPI y/y: 2.9 (Previous: 2.7)
Dec Core CPI y/y: 3.3 (Previous: 3.3)
We started writing about our Cycle Pivot Date for January 6th, 2025, back on December 19, 2024, in our Discord room and to premium members. Sign up for our premium membership for our next cycle pivot date and our next proprietary algorithm buy alert for the S&P 500.
Bottom Line:
Despite uncertainties, the macroeconomic environment shows positive signs: a supportive Fed, improving manufacturing data, and easing inflation. As earnings season progresses and more economic data is released, markets may stabilize, leading to renewed optimism. Stay tuned for the crucial CPI report this Wednesday.
The S&P 500 SPY ETF closed below the important support level of $586.12. On Friday, January 10th, 2025, our proprietary algorithm issued a sell alert. We will await a buy alert before adding to our existing stock positions or initiating new ones. In light of the sell signals identified by our proprietary algorithm for the SPX500 December 31, 2024, RSP ETF December 11, 2024, Nasdaq100 January 2, 2025, QQQ ETF January 2, 2025, IWM ETF December 13, 2025, and DIA ETF December 13, 2025, we advise against deploying dip-buying strategies or attempting to bottom-fish the market.