By STAN CHOE AP Business Writer
NEW YORK (AP) — Most U.S. stocks are rising on Tuesday following an encouraging update on inflation, but drops for Eli Lilly and some other influential companies are keeping indexes in check.
The S&P 500 was 0.1% higher in morning trading, with roughly 70% of the stocks in the index rising. The Dow Jones Industrial Average was up 134 points, or 0.3%, as of 10:50 a.m. Eastern time, and the Nasdaq composite was close to flat.
Stocks got a boost from a report showing inflation at the U.S. wholesale level wasn’t as high last month as economists expected. It’s an encouraging signal ahead of a report coming Wednesday, which will show how much inflation U.S. consumers faced at gasoline pumps, grocery price registers and auto lots in December.
Stubbornly high readings on inflation and a run of better-than-expected readings on the U.S. economy have sent Wall Street into a weekslong rut, pulling it further from the dozens of all-time highs set last year. The fear is that all the strong data will convince the Federal Reserve to deliver less relief this year through lower interest rates.
The Fed has already hinted it’s likely to cut rates just two times in 2025, down from an earlier projection of four. But speculation is growing about whether the Fed may not cut rates at all this year.
Such questions have sent Treasury yields sharply higher in the bond market, which cranks up the pressure on the stock market, but yields slowed their ascent following the update on wholesale inflation.
The yield on the 10-year Treasury ticked up to 4.80 from 4.78% late Monday after a couple oscillations in the morning. It was below 3.65% in September.
The two-year Treasury yield, which more closely tracks expectations for Fed action, edged down to 4.38% from 4.39%.
On Wall Street, KB Home rose 3.7% after delivering a better profit and revenue for its latest quarter than analysts expected. CEO Jeffrey Mezger said faster build times helped it deliver more homes in the three months through November.
The rise in Treasury yields has made mortgages more expensive, but Mezger said buyers nevertheless “continued to demonstrate a desire for homeownership and housing market conditions improved relative to last year.”
H&E Equipment Services’s stock more than doubled to $90.41 after United Rentals said it will buy its smaller rival for $92 per share in cash. The deal values H&E, which rents aerial work platforms, earthmoving equipment and other products, at $4.8 billion, including roughly $1.4 billion of net debt.
United Rentals rose 4.1%.
Even though the majority of stocks were climbing, a 1% dip for Nvidia and other highly influential Big Tech stocks reined in indexes’ gains.
So did Eli Lilly’s drop of 6.1% after it said it expects to report weaker revenue for the last three months of 2024 than it had previously forecast.
CEO David Ricks said last quarter’s 45% growth for Lilly’s Mounjaro diabetes treatment, Zepbound obesity injections and other products in the incretin market wasn’t as big as expected.
Also on the losing end of the market was Signet Jewelers, which tumbled 21.5%. The diamond seller said its sales in the peak shopping days leading up to Christmas this holiday season were below its forecasts. Shoppers were focusing on lower-priced fashion gifts “even more than anticipated in a continued competitive environment,” said Joan Hilson, chief financial and operating officer.
Several of the nation’s biggest financial companies will report their latest results on Wednesday, including JPMorgan Chase and Wells Fargo, as earnings reporting season gears up. Such reports are always under the spotlight, but companies may be under even more pressure to impress this time around.
If Treasury yields continue to rise, either stock prices need to fall or companies need to produce bigger profit growth to make up for it.
In stock markets abroad, indexes were higher across much of Europe and Asia with a few exceptions.
Japan’s Nikkei 225 index fell 1.8% following a holiday on Monday, but indexes were much stronger in China where stocks rose 1.8% in Hong Kong and 2.5% in Shanghai.
Crude oil prices slipped to give back some of their strong gains in recent weeks, which had also been cranking up the pressure on inflation.
Benchmark U.S. crude fell 0.7% to $80.37 per barrel. Brent crude, the international standard, eased 0.8% to $80.39 per barrel.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.