Stocks, Treasuries, Fail to Sustain Early Rally on Core CPI Miss: Jan. 13, 2026

The initial excitement sparked by a cooler-than-anticipated core CPI that drove gains for stocks and Treasuries was short lived, as equities sank into modest losses shortly after the print and yields returned to their flatlines. The reversal was influenced, in part, by the report’s failure to pull forward the next expected rate reduction from June to April, as fixed-income watchers project that Chair Powell’s December cut will be his last at the helm. The sustained hawkishness occurs against the backdrop of certain GOP lawmakers and global central bank leaders expressing support for Powell on the heels of the recently announced DOJ investigation. The development has the greenback rallying, as monetary policy independence concerns are tempered following yesterday’s angst and investors consider whether the easing cycle will end this year in light of reaccelerating growth and above-target inflation. Meanwhile, geopolitical tensions out of Tehran are generating energy supply worries, lifting safe-haven demand and raising commodity interest, with crude oil rising to a two-month high while gold and silver reach fresh records, again. Elsewhere, Bitcoin and forecast contracts are catching bids as participants gravitate to alternative assets while adding portfolio hedges with volatility protection instruments seeing heavier premiums.

Gasoline and Used Cars Limit CPI Gain

December’s Consumer Price Index (CPI) featured the slowest annualized increase since July, as cheaper cars and gasoline softened inflationary pressures. Indeed, the 0.3% month-over-month (m/m) and 2.7% year-over-year (y/y) headline readings matched expectations, but the core segment, which excludes the volatile food and energy categories, arrived a tenth lighter than estimated at 0.2% m/m and 2.6% y/y. Cost increases throughout the month were led by heating services, food at markets, food at restaurants, apparel, transportation services, shelter and medical care, which rose 4.4%, 0.7%, 0.7%, 0.6%, 0.5%, 0.4% and 0.4%. Conversely, used automobiles, gasoline and electricity offset some of the climb, dropping 1.1%, 0.5% and 0.1%. New vehicle stickers were unchanged.

Private-Sector Hiring Accelerates

Private sector payrolls increased by an average of 11,750 workers in each of the four weeks during the period ended Dec. 20, according to ADP. The result is an acceleration from the 11k roster expansion in the numbers for the interval culminating on Dec. 13.

Small Business Optimism Climbs

The National Federation for Independent Business reported a modest uptick in optimism last month, helped by softening inflation, greater labor availability and capital expenditure momentum. The headline score of 99.5 arrived exactly as expected and rose from November’s 99. Increases in economic confidence and profitability trends also boosted results. However, 20% of respondents cited taxes as their most important problem, 19% said quality of workers, and 12% mentioned price pressures.

US Home Sales Bounce Back

New home sales reported for September and October this morning were the strongest since May of 2023. The release of the 738k and 737k seasonally adjusted annualized units (SAAU) was delayed due to the government shutdown.

Is The Market Tired?

This morning’s miss on core CPI occurring against the backdrop of strong employment, housing and survey data, are factors that are normally conducive to a rally in equities, like we saw immediately after the bell. But the fading momentum happening near pivotal resistance levels for the Dow and S&P 500 of 50k and 7k may be a clue to investors that it’s time for a break. Conversely, however, it could signal that participants want to see more earnings reports featuring beats and raises before sending the benchmarks north of those psychologically important aforementioned round numbers. Similarly, the 10-year has failed to hold an increase above 4.20% since early September, which together with sluggish buying appetites and the potential for a reduction in risk premiums stemming from heavier yields opens the door to possible corrections in fixed-income and stocks alike following robust gains in 2025.

International Roundup

Consumer Sentiment Sinks in Australia

Australian shoppers’ outlook for the year weakened this month causing the Westpac–Melbourne Institute Consumer Sentiment Index to fall 1.7% to 92.9 in January from 94.5 in December. Among survey respondents, nearly two thirds said they expect interest rates to increase. Additionally, near-term expectations for the economy and family finances slipped 6.5% and 4.5%, respectively. In a separate print, economic concerns were illustrated by the Unemployment Expectations Index climbing 2.1% to 129.4, illustrating that more consumers anticipate an increase in joblessness. In other matters, homebuyer sentiment remained pessimistic despite the portion of respondents that believe it’s a good time to acquire a house increasing 4%.

UK Retailing Disappoints in December

Retail sales last month climbed 1.2% y/y, slowing from the 1.4% jump in November and below the 1.3% economist consensus estimate, according to the BRC Retail Sales Monitor. Food led the uptick with a 3.1% gain, although a significant portion of the result was from higher prices. Sales of non-food items, conversely, sank 0.3% y/y. The decline was even worse for brick-and-mortar businesses with the category sinking 0.5%. The online channel, furthermore, experienced a 0.1% y/y drop. Sales of toys, home accessories and gaming, however, were bright spots.

Canada Building Permits Tank

The value of building permits issued in Canada during November sank 13.1% m/m, a sharp reversal from the 15.7% jump in the preceding month and worse than the economist consensus estimate for a 5.6% decline.

Relative to the year-ago period, the value of permits were down 0.5%. In constant-dollar terms, building permits declined 13.3% for the latest month and 3.9% a year earlier. The residential sector was down 12% m/m. The following groups along with the extent of their m/m declines detracted from the headline:

• Multifamily dwellings fell 17.36%, driven by weakness in Ontario and Quebec
• Single-family homes edged down 0.1% with weakness in Quebec countering gains in seven provinces and one territory

Nonresidential permits were 14.9% lower relative to October with the weakness occurring across commercial, institutional and industrial segments.

Snap Election Speculation Pushes Yen Down

The Japanese yen sank to its lowest value relative to the US dollar in approximately 18 months in response to speculation that Prime Minister Sanae Takaichi may seek to strengthen her power by calling a snap election. With her current high-level popularity, a snap election could help her increase her clout in parliament if more of her advocates are elected.