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Stocks Fail To Rise Despite Benign Producer Inflation, 30-Year Treasury Yields Hit 5%, Ely Lilly Tumbles: What's Driving Markets Tuesday?

Theodore QuinnTuesday, Jan 14, 2025 1:15 pm ET

5min read

Stocks struggled to gain momentum on Tuesday, despite a benign producer inflation report, as investors grappled with concerns about sticky inflation and a surge in 30-year Treasury yields. Eli Lilly and Company (LLY) shares tumbled following a disappointing earnings report, adding to the market's cautious sentiment.

The Producer Price Index (PPI) for final demand rose 0.2% in April, below the 0.3% consensus estimate, indicating that producer inflation may be easing. However, core PPI, which excludes volatile food and energy prices, increased 0.4%, matching expectations. On a year-over-year basis, PPI rose 2.3%, while core PPI climbed 6.1%. While the report was generally in line with expectations, it did little to boost investor confidence in the stock market.

The 30-year Treasury yield hit 5% on Tuesday, its highest level since October 2023, as investors continued to grapple with concerns about sticky inflation and the Federal Reserve's monetary policy. The surge in Treasury yields has raised concerns about the potential impact on the stock market, as higher yields make bonds more attractive relative to equities.

Eli Lilly and Company (LLY) shares tumbled on Tuesday following a disappointing earnings report. The pharmaceutical giant reported earnings per share (EPS) of $2.31, missing the consensus estimate of $2.37. Revenue also fell short of expectations, coming in at $6.47 billion compared to the $6.55 billion consensus estimate. The company's guidance for the full year was also below expectations, with adjusted EPS now expected to be in the range of $8.70 to $9.00, compared to the previous guidance of $8.90 to $9.20.

The disappointing earnings report and guidance from Eli Lilly added to the market's cautious sentiment on Tuesday, as investors continued to grapple with concerns about sticky inflation and the potential impact of higher Treasury yields on the stock market. While the producer inflation report was generally in line with expectations, it did little to boost investor confidence in the stock market.

In conclusion, stocks struggled to gain momentum on Tuesday, despite a benign producer inflation report, as investors grappled with concerns about sticky inflation and a surge in 30-year Treasury yields. Eli Lilly and Company (LLY) shares tumbled following a disappointing earnings report, adding to the market's cautious sentiment. As investors continue to monitor inflation trends and the Federal Reserve's monetary policy, the stock market may remain volatile in the near term.

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