What’s driving markets

U.S. stock indexes rose after data showed that U.S. wholesale prices slid 0.5% in December, the biggest decline since April 2020, when coronavirus pandemic began. It adds to the evidence that inflation, though still high, may have started to ease.

Meanwhile, December retail sales dropped 1.1%, contracting for the second month in a row. Economists polled by the Wall Street Journal forecasted a decline of 1%.

Investors are also focusing on the next batch of U.S. fourth-quarter corporate earnings reports.

U.S. companies reporting on Wednesday include Charles Schwab
SCHW,
-3.64%,
Prologis
PLD,
+2.70%,
PNC
PNC,
-6.13%,
Kinder Morgan
KMI,
+0.24%,
Discover
DFS,
+0.46%
and Alcoa
AA,
+4.37%.

The S&P 500 index is up 3.95% so far this year on hopes easing inflation will allow the Federal Reserve to be less aggressive in its monetary tightening cycle, making an economic hard landing less likely and thus supporting company earnings.

So far, with 33 of the S&P 500 having reported, 67% of those have beaten profit forecasts, according to Refinitiv. However, high profile disappointments, from the likes of Goldman Sachs on Tuesday, are making it difficult for the S&P 500 to move decisively above the 4,000 level.

Technical factors, such as the CBOE Volatility index, or VIX
VIX,
-3.36%,
below 20, suggesting complacency, and a high proportion of stocks looking overbought, may also constrain the latest rally, according to Mark Newton, head of technical strategy at Fundstrat.

“Given that the VIX is showing a similar potential area of confluence this week while the percentage of SPX issues above their 20-day moving average has gone back above 80, this should bring about a stalling out in U.S. equities by end of week,” Newton wrote in a note to clients.

Other U.S. economic updates set for release on Wednesday include Industrial production and capacity utilization for December at 9:15 a.m.. The NAHB home builders’ index for January is due at 10 a.m. alongside November business inventories.

The Fed is back in focus, too, with its Beige Book of updates on regional economic conditions published at 2 p.m. and Philadelphia Fed President Patrick Harker speaking at 3:15 p.m. followed by Dallas Fed President Lorie Logan making comments at 5 p.m.. All times Eastern.

Companies in focus

• United Airlines
  UAL,
  -0.03%
  rose after reporting quarterly earnings that beat Wall Street’s estimates for the fourth quarter,  saying it managed well the severe winter-weather disruptions in late December, and offered an optimistic view of the current quarter and guidance for full-year 2023.

• Microsoft Corp.
  MSFT,
  +0.20%
  shares edged up 0.4% Wednesday after reports said Tuesday that the company is preparing chop thousands of jobs in engineering and human resources.

• Moderna Inc.
  MRNA,
  +7.55%
  gained 7% after the drugmaker said an experimental vaccine significantly reduced the risk of a viral respiratory disease among older adults in a large clinical trial.

• J.B. Hunt Transport Services Inc.
  JBHT,
  +4.99%
   shares rose 5.6% Wednesday after the company said it would pay out more than $8.8 million in “appreciation bonuses” to full-time drivers and full-time hourly maintenance and office workers.

• Coinbase Global
  COIN,
  +3.69%
  shares gained 3% Wednesday despite that the company announced it will cease operations in Japan, citing unstable “market conditions” in a blog post.