US stocks push higher as traders analyze inflation data
Wall Street stocks rose, Treasury yields fell and the dollar weakened on Wednesday as traders looked past data showing US inflation hit its highest level in nearly 40 years to focus on expectations that price increases would peak soon.
The blue-chip S&P 500 index gained 0.3%, while its information technology sub-index gained 0.4%. The tech-heavy Nasdaq Composite rose 0.2%.
The dollar fell against the pound, euro and South African rand, with an index measuring the US currency against six others falling around 0.6%.
Meanwhile, the yield on the benchmark 10-year US Treasury note, which moves inversely to its price, edged down 0.02 percentage points to 1.72%. The two-year yield, which closely tracks interest rate expectations, remained stable at 0.9%.
Consumer prices in the United States rose 7% in December from the same month last year, compared with an annual rate of 6.8% in November, according to data released Wednesday by the Labor Department. Its December rise was the largest since June 1982, but in line with analysts’ expectations.
Prices rose 0.5% in December from November, slightly faster than the 0.4% forecast by Wall Street economists.
Testifying before the US Senate Banking Committee on Tuesday, Federal Reserve Chairman Jay Powell pledged the central bank would tackle high inflation and predicted that supply chain bottlenecks caused by pandemic disturbances would reduce this year.
“We continue to expect a significant slowdown over the coming year as the impulses from reopening and fiscal stimulus fade and Covid-related supply constraints eventually ease” , TD Securities strategists wrote in a note to clients. “But, for now, the data remains quite strong.”
Following the inflation report, traders continued to bet that the Fed would raise interest rates three or four times this year to around 1%.
These calculations – implicit by swap markets and based on a widely held view that the current high rates of inflation will fade as global supply chain bottlenecks caused by the economic disruption of lockdowns are starting to unravel – have been cited by investors as supportive of stock markets.
Despite a rocky start to the year, where the S&P 500 index fell for five out of seven sessions and the Nasdaq Composite briefly fell into a correction, the S&P traded on Wednesday about 1.6% below its highest. historic high.
“Yes, there is a housing cut coming,” said Tim Graf, macro strategist at State Street, speaking ahead of the inflation data. “But does it make a meaningful difference to the financing environment for households and businesses?” he added. “We don’t think so too much.”
Elsewhere in the markets, Europe’s Stoxx 600 stock index gained 0.6% and London’s FTSE 100 gained 0.8%. Hong Kong’s Hang Seng index closed 2.8% higher, with its technology sub-index posting its biggest daily gain since October.