U.S. stocks traded sideways on Wednesday, January 10, lacking a clear direction as investors eagerly await key inflation data and the start of the fourth-quarter earnings season. While tech stocks inched higher, major indexes ended the day with modest gains, reflecting a cautious mood ahead of important economic and corporate milestones.

The Dow Jones Industrial Average (DJI) inched up 0.1%, barely reaching above 37,500, while the S&P 500 (GSPC) pushed out a 0.2% gain. The Nasdaq Composite (IXIC) led the pack, climbing 0.4%, building on its sole positive performance among major indexes the previous day.

Inflation in Focus

Thursday's release of December's consumer price index (CPI) takes center stage, holding the potential to shake up the market significantly. A continued decline in inflation, following November's positive news, could encourage hopes of a dovish pivot from the Federal Reserve. However, a hotter-than-expected reading could reignite inflation fears and send a hawkish signal from the central bank, potentially dampening risk appetite.

Rate Cuts

Recent market rallies have been fueled by anticipation of the Fed easing its monetary tightening policy sooner rather than later. But some analysts warn that investors may be overly optimistic, pricing in too many rate cuts this year. Fading confidence in an early policy shift was clear in Tuesday's market dip, and Wednesday's more subdued trading could be a reflection of the ongoing uncertainty.

Bitcoin Bounces Back

After a wild swing caused by a fake SEC tweet announcing approval for spot bitcoin ETFs, the leading cryptocurrency stabilized above $45,000. The episode highlighted the volatility in the digital asset space and renewed questions about regulatory clarity for bitcoin-based exchange-traded funds.

Earnings Season Looms

With major Wall Street banks like JPMorgan Chase (JPM) set to report earnings on Friday, the fourth-quarter earnings season officially kicks off. The performance of these financial giants will be crucial in providing insights into the health of the U.S. economy and offer a glimpse into corporate sentiment for the coming year. After a bumpy start to 2024, investors will be keeping a close eye on earnings for signs of corporate resilience and potential upside for stocks.