By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. Treasury yields dipped on Tuesday after data showed U.S. producer prices rose less than expected in December, and stock indexes mostly fell as investors remained cautious ahead of U.S. consumer price data on Wednesday and the start of quarterly earnings reports.

The U.S. producer price index climbed 0.2% month-on-month in December, below expectations for a 0.3% increase and down from 0.4% in November.

Investors have been worried about persistent U.S. inflation. The PPI report did not change the view that the Federal Reserve would not cut interest rates again before the second half of this year, and investors still await the more closely watched U.S. consumer price index report.

CPI data is expected to show month-on-month inflation held at 0.3% in December while the year-on-year figure climbed to 2.9%, from 2.7% in November.

Most stock indexes were higher following the PPI report but the S&P 500 and Nasdaq turned lower.

U.S. fouth-quarter 2024 earnings get rolling on this week, with results from some of the biggest U.S. banks due starting Wednesday. Lenders were expected to report stronger earnings, fueled by robust dealmaking and trading.

“Earnings will continue to be strong, and the problem really for this market is it’s already pricing in good earnings, so maybe you’re going to need very good earnings to keep its rise going. Also, inflation/bond market levels have been a real concern for stocks,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

The Dow Jones Industrial Average rose 81.04 points, or 0.18%, to 42,378.16, the S&P 500 fell 8.39 points, or 0.14%, to 5,827.83 and the Nasdaq Composite fell 86.33 points, or 0.45%, to 19,001.77.

MSCI’s gauge of stocks across the globe rose 1.23 points, or 0.15%, to 833.02. The STOXX 600 index fell 0.08%.

The potential for tariffs that could boost inflation once President-elect Donald Trump is in office also hangs over the market.

Bloomberg reported that Trump’s aides were weighing ideas including increasing tariffs by 2% to 5% a month to increase U.S. leverage and to try to avoid an inflationary spike.

The yield on the benchmark 10-year Treasury note eased marginally, but it remained close to its 14-month high.

It was last down slightly at 4.788% after hitting 4.805% overnight, the highest since November 2023.

Higher yields have weighed on equities by making bonds relatively more attractive and increasing the cost of borrowing for companies.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,

fell 0.13% to 109.26, with the euro up 0.53% at $1.0298.

Against the Japanese yen, the dollar strengthened 0.29% to 157.92.

Oil prices eased from the previous day’s four-month highs.

U.S. crude fell $1.32 to settle at $77.50 a barrel and Brent dropped to $1.09 to settle at $79.92.

In Asia overnight, Japan’s Nikkei slumped 1.8% as investors shed chip stocks and worried about a possible Bank of Japan interest rate hike.

Bank of Japan Deputy Governor Ryozo Himino, in a speech to Japanese business leaders, left the door open to a rate hike at the conclusion of the next policy meeting on Jan. 24.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Harry Robertson in London; Editing by Christina Fincher, Angus MacSwan and Cynthia Osterman)

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