Stocks rise as investors eye inflation data, showing biggest jump since 1982

Stocks rose on Wednesday as investors watched a new inflation report, which showed another decades-high price rate increase in the recovering economy. Still, it came a day after Federal Reserve Chairman Jerome Powell’s remarks reaffirmed that the central bank would step in if necessary to curb price hikes.

The December Consumer Price Index (CPI) from the Bureau of Labor Statistics showed that prices increased at a rate of 7.0% year-on-year at the end of 2021, marking the fastest increase since 1982 That’s in line with consensus estimates, based on Bloomberg data, and sped up from the already high 6.8% increase in November. On a monthly basis, consumer prices rose 0.5%, slightly more than the 0.4% expected increase, to mark the eighteenth consecutive month of price increases.

Excluding food and energy prices, the so-called basic consumer price measure rose 5.5% in December from a year ago, reaching the fastest rate since 1991.

Wednesday’s market moves came after a rebound on Tuesday, with markets at least temporarily finding relief in assurances from Federal Reserve Chairman Jerome Powell that the central bank would step in if necessary to dampen the price hike. At Powell’s re-appointment hearing before the Senate Banking Committee, the central bank leader reiterated that the Fed will use its political tools to bring inflation down.

“If we see inflation persist at high levels, for longer than expected, if we need to raise interest rates more over time, then we will,” Powell said at the hearing.

The central bank had previously telegraphed that it was considering three interest rate hikes this year to push benchmark rates up from their current levels near zero. However, some large Wall Street companies have predicted that the Fed will hike rates four times given the current inflationary environment.

But while Powell doubled down on the Fed’s target of curbing inflation and using interest rate hikes as a tool to achieve it, he did not further reveal the Fed’s plan to start cutting. its balance sheet of nearly $ 9 trillion. Minutes from the Fed’s December meeting last week suggested central bank officials were starting to discuss the Fed’s balance sheet downsizing after nearly two years of asset purchases to help prop up stocks. markets during the pandemic. Powell reiterated during his hearing that he expected the bankruptcy process to begin this year.

“I think the biggest comment on the minds of most investors we talk to around the world would be a ‘policy error’ that the Fed might be too aggressive,” Brian Belski told Yahoo Finance Live on Tuesday, BMO Capital Markets Chief Investment Strategist. . “Mr. Powell basically came out today and said it’s going to be a process… as far as how long it’s going to take, and I think that’s what calms investors.”

While the outlook for higher borrowing costs and tighter financial conditions fueled volatility in U.S. stocks and tech stocks, especially in recent sessions, Tuesday’s session saw a reversal, the Nasdaq Composite, with a strong technological component, clearly outperforming.

“The problem with the technology, I would say, is not so much that of a little exposure to the additional term because the growth is further away, but it’s just a valuation problem,” said Simeon Hyman, strategist in global investment from ProShares, at Yahoo Finance Live Tuesday. “And indeed, those heaviest, most capitalized tech stocks were perhaps just a little expensive at the end of last year and early 2022. But don’t rule out good growth stories altogether because they The biggest defense against inflation is growth in earnings and dividends.

11:40 a.m. ET: Financial data sets new record as expectations for higher rates rise

On Wednesday, sector trading fund S&P 500 Financials XLF again set a new intraday record, marking its fourth record in the 8 trading days so far in 2022.

ETF prices edged up to $ 41.65 during morning trading, and it is back around 6% so far for the year to date. Over the past 52 weeks, it has gained 32% on intraday trading, surpassing the S&P 500’s 24% rise in that time frame.

Individual bank stocks also rose on Wednesday. JPMorgan Chase, which releases quarterly results Friday morning, rose 0.3%, while shares of Citigroup rose by roughly the same margin.

10:59 a.m. ET: What economists say about highest inflation in about 40 years

US stocks rose despite the biggest rise in inflation since 1982, according to this morning’s CPI. According to some experts, this could be because the market had already integrated the rise, since consensus economists were already forecasting inflation to accelerate to 7% in December. In addition, some of the components under the overall CPI index fell from previous months.

Here’s what some economists and strategists had to say about the latest CPI report, based on emails and notes sent to Yahoo Finance:

  • “While today’s inflation figure is roughly in line with our expectations and those of most analysts, the data should have been better given the significant drop in energy prices, especially gasoline. Core inflation is now rising faster than the headlines month after month. Inflationary pressures are now fairly well endemic throughout the US economy. ” – Matthew Sherwood, Global Economist at Economist Intelligence Unit

  • “Persistent high inflation rates along with recent strong labor market data reinforce the hawkish rhetoric provided by the Fed. Looking ahead, Omicron appears poised to dictate the fate of the economy in January and possibly in January. February. But current indications of how the new variant results suggest the Fed will stay on track to reduce its accommodative monetary policy, most likely as early as March of this year, by raising rates for the first time since December 2018 . ” – Christian Scherrmann, American economist of the DWS group

  • The December increase to 7.0% … is probably not quite the peak which we expect will be around 7.2% in January and February, but the string of big increases is over and it will start to decline in March. In September, we are looking for 4-1 / 2%. “- Ian Shepherdson, Chief Economist at Pantheon Macroeconomics

  • “The country is unlikely to experience another year of inflation like in 2021, as price hikes were fueled by the Fed’s emergency stimulus and excessive fiscal stimulus that pushed demand. of goods bought in stores at unforeseen levels. The danger is just how entrenched inflation has taken hold in society and the warning signs are clearly there with prices for services rising in unison with goods. consumption, even with the service sector of the economy not returning to pre-pandemic levels. ” – Chris Rupkey, Chief Economist for FWDBONDS

9:31 am ET: stocks open higher

Here’s where the markets were trading on Wednesday morning:

  • S&P 500 (^ GSPC): +25.02 (+ 0.53%) to 4,738.09

  • Dow (^ DJI): +170.06 (+ 0.47%) to 36,422.08

  • Nasdaq (^ IXIC): +130.07 (+ 0.83%) to 15,283.58

  • Raw (CL = F): + $ 0.93 (+ 1.15%) to $ 82.15 per barrel

  • Gold (CG = F): +1.70 $ (+ 0.09%) to $ 1,820.20 per ounce

  • 10-year cash flow (^ TNX): -2.6 bps for a yield of 1.72%

8:37 a.m. ET: Consumer prices post their biggest jump since 1982

The U.S. Consumer Price Index (CPI) posted its fastest rise in nearly 40 years at the end of 2021, signaling inflationary pressures still high as supply chain bottlenecks persist and that demand remains high.

Prices increased at a rate of 7.0% in December from a year ago – the fastest pace since June 1982. On a month-to-month basis, the increase was 0.5%, or slightly above the expected 0.4% increase, but a slowdown from November’s 0.8. % Gain.

By category, the prices of used cars and trucks and shelters were the main contributors to the overall increase. The used cars and trucks index rose for a third consecutive month and accelerated to a 3.5% month-over-month increase in December from the increase of 2, 5% in November. This index was also 37.3% higher compared to the same month last year. House prices rose 0.4%.

The core measure of consumer price changes, which excludes volatile food and energy prices, rose 5.5% in December from a year ago, the fastest increase since 1991. This increase has accelerated from an annual gain of 4.9% in November.

7:15 a.m. ET Wednesday: Stock futures gain ahead of CPI report

Here’s where the markets were trading ahead of Wednesday’s opening bell:

  • S&P 500 (^ GSPC): +5.5 points (+ 0.12%) to 4,710.50

  • Dow (^ DJI): +41 points (+ 0.11%) to 36,169.00

  • Nasdaq (^ IXIC): +32.75 points (+ 0.21%) to 15,863.75

  • Raw (CL = F): + $ 0.73 (+ 0.9%) to $ 81.95 per barrel

  • Gold (CG = F): – $ 1.80 (-0.10%) to $ 1,816.70 per ounce

  • 10-year cash flow (^ TNX): -0.1 bps for a yield of 1.745%

6:09 p.m. ET Tuesday: Stock futures open slightly higher

Here’s where the markets were trading Tuesday night:

  • S&P 500 Futures Contracts (ES = F): +0.5 point (+ 0.01%), at 4,705.50

  • Dow Futures (YM = F): +2 points (+ 0.01%), at 36,130.00

  • Nasdaq Futures (NQ = F): +3.5 points (+ 0.02%) to 15,834.50

Photo by: NDZ / STAR MAX / IPx 2021 1/10/22 People walk past the New York Stock Exchange (NYSE) on Wall Street on January 10, 2022 in New York City.

Emily McCormick is a reporter for Yahoo Finance. Follow her on twitter

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, Youtubeand reddit

Leave a Comment