Stocks rise as U.S. inflation meets expectations
BNN Bloomberg
U.S. stocks rose after in-line inflation data spurred bets the Federal Reserve won’t have to accelerate plans to tighten monetary policy.
U.S. stocks rose after in-line inflation data spurred bets the Federal Reserve won’t have to accelerate plans to tighten monetary policy.
The S&P 500 gained 0.7 per cent and Nasdaq 100 added 0.8 per cent as the headline CPI rate came in at 6.8 per cent, the highest since 1982. The dollar was little changed while the yield on the U.S. 10-year Treasury fell to 1.47 per cent.
Investors had been looking forward to the inflation report and a meeting of the Federal Reserve next week for clues on the pace of tapering and interest rate increases, after Chairman Jerome Powell said the central bank should consider withdrawing stimulus at a faster pace.
The in-line reading “is good news, relative to fears going in. People thought it would be much worse,” said Dennis DeBusschere, founder of 22V Research. “It is still a high number to be sure, but should reduce some worries on the Fed having to crush growth. So the higher-cost-of-capital trade, which got killed yesterday, should bounce some.”
The report comes as uncertainty from the omicron virus variant has also been weighing on the market. The U.S. appears to be headed for a holiday crisis as virus cases and hospital admissions climb, while London firms started telling thousands of staff to work from home and cities around the world imposed restrictions. The omicron strain may be spreading faster in England than in South Africa, though overall European Union numbers look to have hit a plateau.
“We believe the stock market will continue to rise as consumer spending remains strong and corporate profits -- for now -- are continuing to grow, but increased volatility is likely over the next 6-12 months as inflation, interest rates and Fed policy are all going to be shifting much more rapidly than they have in the past,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “The most important thing investors can do is to remain diversified and not lean too heavily into any one area.”
