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US stocks close higher after key inflation report matches expectations

Last updated: 16:05 12 Jan 2022 EST, First published: 06:30 12 Jan 2022 EST

Market Report -

4:05pm: US equities close higher

US stocks closed higher after a key inflation report showed a historic gain but largely matched expectations.

The moves come after the December reading for the consumer price index, a gauge of prices across a broad spectrum of goods, showed a gain of 7% year over year. That is the biggest jump since 1982, but met expectations.

On the day, the DJIA rose by 39 points, or 0.11%, to 36,291 and the S&P 500 increased 0.28% to 4,726.

And the tech-heavy Nasdaq increased 35 points, or 0.23%, to 15,188.  

12:15pm: Wall Street gains midday

US markets continued to gain at the midday mark on Wednesday as investors weighed the inflation data.

At noon, the Dow Jones Industrial Average gained 35 points, or 0.1% at 36,261; while the broader S&P 500 gained 0.2%, and the tech-heavy Nasdaq Composite was up by 0.1%.

“The headline inflation figure was no surprise and was pretty much in line with expectations, largely driven by higher food, shelter, and used vehicles prices,” said Yash Chauhan, analyst, global capital markets at Validus Risk Management. “However, energy costs which were a key driver in 2021 posted a decline.”

The analyst noted: “The broader market view is that the Fed is behind the curve and this print builds further pressure on the FOMC (Federal Open Market Committee) to act quicker. Powell reiterated yesterday that the Fed is prepared to do what’s necessary to contain inflation.”

“We believe that there is a good chance that the Fed will hike in March, and then will be in a wait-and-watch mode for any indications on how supply chain issues take shape as a result of the recent rise in Omicron cases globally,” Chauhan concluded.

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9.42am: Wall Street on front foot at open 

US benchmarks started higher in New York mid-week as the market appeared to brush off a hot inflation report.

The Dow Jones Industrial Average started in New York up 86 points at 36,338.

The S&P 500 gained 19 points at 4,732. The tech-heavy Nasdaq advanced 134 points to stand at 15,287.

Earlier, the consumer price index (CPI) inflation report showed a gain of 7% year-over-year - the biggest jump since 1982, with energy and food price hikes big contributors.

"This reading will put further pressure on the Fed to start tightening policy and the narrative around four rate rises this year is likely to be strengthened," said Dan Boardman-Weston from BRI Wealth Management.

But he added: "Inflation will start falling from May/June as energy prices start to have weaker impact on the overall level of inflation.

"The economy is in a strong position at the moment and it should be able to cope with four rate increases. Whether the market will take tighter policy in its stride is another matter but our expectation is that the monetary policy induced volatility will abate and that the strength of the economy will positively impact markets."

8.55am: US consumer price index climbs 7%

US stocks remained on course to open higher as inflation numbers hit a near 40-year high, but came in much as expected.

The consumer price index for December rose 7% year on year, up from 6.8% the previous month. That was the biggest annual increase since June 1982 when Ronald Reagan was in the White House.

On a month by month basis it rose 0.5%, after rising 0.8% in November.

Shelter and used cars and trucks were the biggest contributors to the increase while food increased less than in previous months and energy declined, falling 0.4% as petrol and gas both decreased.

Fawad Razaqzada, market analyst at Think Markets.com commented: "There was an interesting response to the slightly stronger-than-expected US inflation data. The US dollar fell against most currencies while stock index futures edged up immediately after the data was released. It looks like the market had prepared for even hotter inflation, which obviously didn’t materialise. So the reaction can best be described as relief."

6.30am: US stocks seen opening higher

US stocks are expected to open higher after Federal Reserve chair Jerome Powell soothed investors’ nerves ahead of data that is likely to show inflation at its highest in almost 40 years. 

Futures for the Dow Jones Industrial Average rose 0.11% in Wednesday pre-market trading, while the broader S&P 500 index also gained 0.11% and those for the tech-heavy Nasdaq 100 added 0.24%.

Stocks finished higher on Tuesday after Powell told a congressional hearing that the Fed could raise interest rates to rein in surging inflation without harming the economy.

The Nasdaq led the gains, rising 1.41% to close at 15,153 points. The S&P 500 followed with a 0.92% increase to 4,713 points, while the Dow also posted a healthy gain of 0.51% to close at 36,252 points.   

The consumer price index (CPI), due for release ahead of the market open at 8:30am Eastern Time, is expected to show headline inflation reached 7.1% in December from 6.8% in November, a 39-year high. 

“US equities are looking to further pare 2022’s losses with futures now edging higher, potentially extending Tuesday’s rebound in which tech stocks outperformed,” commented Han Tan, chief market analyst at Exinity Group.

“Stock bulls are taking a liking to Fed Chair Jerome Powell’s reassurances that the central bank could trigger rate hikes to rein in surging inflation without harming the US economic recovery. 

“It’s intriguing how a volatile market that had dreaded the prospects of more rate hikes than previously expected has been suddenly soothed by near-term policy tightening.”

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