U.S. stocks advanced with investors gearing up for Tuesday’s reading on consumer prices. U.S. Treasuries ended Monday lower, erasing earlier gains.

The S&P 500 rose 1.4 per cent, notching its best session in nearly two weeks. The tech-heavy Nasdaq 100 also climbed more than 1 per cent. Treasury yields rose, with the 10-year rate around 3.61 per cent. The dollar advanced. 

All eyes will be on the U.S. consumer price index reading on Tuesday, which is expected to show prices, while still high, are continuing to decelerate. The S&P 500 — in a best-case scenario — could rally as much as 10 per cent on a softer CPI reading, according to JPMorgan Chase & Co.’s sales and trading desk. However, the chances of that happening is about 5 per cent, according to their analysis. The index rose 5.5 per cent in November — its best post-CPI day ever — after a cooler inflation reading.

A subdued CPI print would justify the Federal Reserve’s projected half-point move on Wednesday and shed light on whether markets can expect rate cuts in late 2023. While central bank officials have indicated a downshift in the pace of rate hikes, they have also emphasized that borrowing costs will need to remain restrictive for some time. 

“I wouldn’t read anything into the move today. The move will be after CPI one way or another,” John McClain, portfolio manager at Brandywine Global, said. “People are getting lulled into a false sense of security on a soft landing. The Fed isn’t cutting anytime soon. This is just going to be a longer cycle compared to 2020.”

Following the Fed, the European Central Bank will announce its rate decision Thursday, and may also opt for a half-point hike. Markets will also contend with decisions from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.

Key events this week:

• US CPI, Tuesday
• FOMC rate decision and Fed Chair news conference, Wednesday
• China medium-term lending, property investment, retail sales, industrial production, surveyed jobless, Thursday
• ECB rate decision and ECB President Lagarde briefing, Thursday
• Rate decisions for UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan, Thursday
• US cross-border investment, business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
• Eurozone S&P Global PMI, CPI, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.4 per cent as of 4:01 p.m. New York time
• The Nasdaq 100 rose 1.2 per cent
• The Dow Jones Industrial Average rose 1.6 per cent
• The MSCI World index fell 0.1 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro was little changed at $1.0535
• The British pound was little changed at $1.2271
• The Japanese yen fell 0.9 per cent to 137.73 per dollar

Cryptocurrencies

• Bitcoin was little changed at $17,130.18
• Ether rose 0.2 per cent to $1,267.06

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.61 per cent
• Germany’s 10-year yield was little changed at 1.94 per cent
• Britain’s 10-year yield advanced two basis points to 3.20 per cent

Commodities

• West Texas Intermediate crude rose 3.4 per cent to $73.41 a barrel
• Gold futures fell 1.1 per cent to $1,791.40 an ounce