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

Stocks rose on Wednesday as investors awaited a new report on inflation, which showed another rise in the rate of decades of price hikes across the recovery of the economy. However, this came the day after Federal Reserve Chair Jerome Powell confirmed that the central bank would intervene as needed to curb rising prices.

The December Consumer Price Index (CPI) released by the Bureau of Labor Statistics showed prices rising at an annual rate of 7.0% at the end of 2021, the fastest increase since 1982. This is in line with consensus estimates, based on Bloomberg data, and accelerating from the high increase Already in November, which amounted to 6.8%. On a monthly basis, consumer prices rose 0.5%, or slightly more than the expected 0.4% rise, marking the 18th consecutive month of price increases.

Excluding food and energy prices, the so-called core measure of consumer prices rose 5.5% in December from a year ago, coming in at the fastest rate since 1991.

Wednesday’s market moves followed a rebound on Tuesday, as markets found at least temporary relief in assurances from Federal Reserve Chair Jerome Powell that the central bank would intervene as necessary to dampen price hikes. At Powell’s re-nomination hearing before the Senate Banking Committee, the central bank chief reiterated that the Fed would use its policy tools to bring down inflation.

“If we see inflation continuing at high levels, for longer than expected, and if we have to raise interest rates more over time, we will,” Powell said during the session.

The central bank had previously telegraphed that it was looking at three rate hikes this year to raise interest rates from their current near-zero levels. However, some major Wall Street firms have expected the Fed to raise interest rates four times against the current inflationary background.

But although Powell doubled down on the Fed’s goal of curbing inflation and using rate hikes as a tool to achieve it, he revealed little about the Fed’s plan to begin shrinking its $9 trillion balance sheet. The minutes of the Federal Reserve’s December meeting last week suggested that central bank officials began discussing withdrawing the Fed’s balance sheet after nearly two years of asset purchases to help support markets during the pandemic. Powell reiterated at his hearing that he expects the re-budget 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 mistake’ that the Fed could be aggressive,” Brian Belsky, chief investment analyst at BMO Capital Markets, told Yahoo Finance Live on Tuesday. Extremely”. . “Mr. Powell basically noon today and said this is going to be a process … in terms of how long this is going to take, and I think that’s what calms investors down.”

Although expectations of higher borrowing costs and tighter financial conditions have triggered volatility in US stocks and tech stocks especially in recent sessions, Tuesday’s session saw a reversal, with the high-tech Nasdaq Composite sharply outperforming.

“The problem with technology, I would argue, is not one of exposure for a small additional duration because growth is so far away, it’s just one of valuation,” Simeon Heymann, global investment strategist at ProShares, told Yahoo Finance Live on Tuesday. “And indeed, those tech stocks with big, bigger caps might have been a bit too expensive at the end of last year and the beginning of 2022. But don’t completely rule out the good growth stories because that’s the biggest defense against inflation. It’s dividend growth and dividend growth.”

11:40 a.m. ET: Financial data hits new record as expectations surge with higher rates

The S&P 500 Financials XLF sector trading fund hit a new intraday high again on Wednesday, setting its fourth record in the eight trading days so far in 2022.

ETF prices are slightly up as high as $41.65 during morning trading, and are back about 6% year-to-date. Over the past 52 weeks, it is up 32% in day trading, outperforming the S&P 500 by 24% over that period.

Shares of individual banks also rose on Wednesday. JPMorgan Chase, which announces its quarterly earnings results on Friday morning, is up 0.3%, while Citigroup shares are up by roughly the same margin.

10:59 a.m. ET: What economists are saying about the highest inflation in nearly 40 years

US stocks rose despite the biggest rise in inflation since 1982, based on this morning’s CPI. According to some critics, this may be due to the fact that the market had already expected a rally, as economists were already looking to see inflation accelerate to 7% in December. Moreover, some of the components under the CPI heading declined compared to the 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:

  • “Although today’s inflation number was largely 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 headline on a monthly basis. Now It is well endemic throughout the American economy.” – Matthew Sherwood, Global Economist at the Economist Intelligence Unit

  • “Continuing high inflation combined with recent strong labor market data reinforce the hawkish narrative that the Fed has given. Looking ahead, Omicron appears poised to dictate the fate of the economy in January and possibly February. But current indications about how the new change results are pointing to That the Fed will remain on track to reduce its accommodative monetary policy, likely as early as March this year, by raising interest rates for the first time since December 2018. — Christian Sherman, American economist at DWS Group

  • December increase to 7.0% … the peak we think will probably not be around 7.2% in January and February, but the streak of big increases is over, and it will start to decline in March. By September, we’re looking at 4-1/2%. “- Ian Shepherdson, Chief Economist at Pantheon Macroeconomics

  • “The nation is unlikely to experience another year of inflation as it did in 2021 where price increases were fueled by the Federal Reserve’s emergency stimulus and excessive fiscal stimulus that pushed demand for store-bought goods to unexpected heights. The risk is just how inflation has become ingrained in society and warning signs are clear with service prices rising in unison with consumer goods even as the service sector in the economy has not returned to pre-pandemic levels.” – Chris Robke, Chief Economist at FWDBONDS

9:31 a.m. ET: Stocks open higher

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

  • Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): +25.02 (+0.53%) to 4738.09

  • dow (^ DJI): +170.06 (+0.47%) to 36422.08

  • Nasdaq (^ ninth): +130.07 (+0.83%) to 15283.58

  • raw (CL = F.): +0.93 dollars (+15%) to 82.15 dollars per barrel

  • gold (GC = F.): + $1.70 (+0.09%) to $1,820.20 per ounce

  • Treasury for 10 years (^ degeneration): -2.6 basis points for a yield of 1.72%

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

The US Consumer Price Index (CPI) posted its fastest rise in nearly 40 years at the end of 2021, indicating continued rising inflationary pressures as supply chain bottlenecks persist and demand continues to rise.

Prices rose 7.0% in December from a year ago – the fastest pace since June 1982. On a monthly basis, the rise was 0.5%, or just above the expected 0.4% increase, but slower than 0.8 in November. % he won.

By category, prices for used cars, trucks, and shelters were the biggest contributors to the title increase. The used cars and trucks index rose for the third month in a row and accelerated to 3.5% month over month in December from November’s 2.5% increase. This indicator also increased by a remarkable 37.3% compared to the same month last year. Shelter prices increased 0.4%.

The core measure of consumer price changes, which does not include volatile food and energy prices, rose 5.5% in December from a year ago, the fastest increase since 1991. The increase accelerated from a 4.9% annual increase in November.

7:15AM ET Wednesday: Stock futures up ahead of CPI report

Here’s where the markets are trading before the opening bell on Wednesday:

  • Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): +5.5 points (+0.12%) to 4710.50

  • dow (^ DJI): +41 points (+0.11%) to 36169.00

  • Nasdaq (^ ninth): +32.75 points (+0.21%) to 15863.75

  • raw (CL = F.): +0.73 dollars (+0.9%) to 81.95 dollars per barrel

  • gold (GC = F.):- $1.80 (-0.10%) to $1,816.70 per ounce

  • Treasury for 10 years (^ degeneration): -0.1 basis points to get 1.745%

6:09pm ET Tuesday: Stock futures open slightly higher

Here’s where the markets are trading on Tuesday night:

  • S&P 500 futures contracts (ES = F.): +0.5 points (+0.01%) to 4,705.50

  • Dow futures contractsYM = F.): +2 points (+0.01%) to 36130.00

  • Nasdaq futures contractsNQ = F.): +3.5 points (+0.02%) to 15,834.50

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

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

Read the latest financial and business news from Yahoo Finance

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