- Stocks end higher despite December inflation data.
- Headline inflation hits 7%, the highest since 1982, while core CPI jumps to 5.5%.
- Oil prices reach pre-Omicron levels after API reports 1 million barrel decline in domestic crude stocks
- Biogen stock slumps as Medicare limit coverage for key Alzheimer’s treatment.
- Take-Two stocks gains as BMO touts mobile revenue potential from $12.7 billion Zynga takeover
- Benchmark 10-year note yields hold at 1.73%
Updated at 4:13 pm EST.
Stocks finished higher Wednesday as investors digested a key reading of December inflation that showed the fastest surge in consumer prices in nearly four decades.
The Dow Jones Industrial Average finished up 38 points, or 0.11%, to 36,290, while the S&P 500 gained 0.28%, and the tech-focused Nasdaq rose 0.23%.
The benchmark 10-year Treasury note yields eased to 1.73% following the CPI data.
However, with the headline reading of 7% largely matching Wall Street’s forecasts, and investors predicting a near-term peak for core-price increases, stocks extended gains following the data release.
“We’re still seeing the effects of supply chain issues resulting in higher prices for a variety of goods and it remains to be seen if these pricing pressures will start to moderate as we move through 2022,” said Brian Price, head of investment management at Commonwealth Financial Management. “The market will continue to be laser focused on upcoming changes in the Federal Reserve’s interest rate policy in the coming months.”
Federal Reserve Chairman Jerome Powell told lawmakers during hits Senate confirmation hearing on Capitol Hill Tuesday that he expects inflationary pressures — recently dismissed as ‘transitory’ — to persist throughout much of the year.
He did not, however, suggest a more hawkish response to the fastest inflation levels since the early 1980s, noting only the he and his colleagues would be “humble but a bit nimble” in executing rate hikes and taking any decision on running-off the Fed’s $9 trillion balance sheet.
That tone provided a boost to stocks, with all three benchmarks closing out the session Tuesday in positive territory, pushed the dollar index to a six week low against its global peers and helped lift oil prices to their highest levels since the Omicron variant was first identified in November.
So-called core inflation, which strips out the impact of volatile components such as food and energy, rose to 5.5% — from 4.9% previous — but came in modestly shy of Street forecasts and could begin to level-off and slowly decline in the coming months as the ‘base effects’ from last year’s Covid-lead spike ease from annual calculations.
The hot headline reading, however, is likely to spur the Fed into action, with the CME Group’s FedWatch tool showing a 74.4% chance of a rate hike in March, up from around 33.6% at the beginning of December.
Related: Greenflation Investing Opportunities In 2022
Biogen (BIIB) – Get Biogen Inc. Report shares slumped 6.7% after the U.S. government’s Medicare program said it will limit access to the drugmaker’s newly-approved Alzheimer’s treatment.
The U.S. Federal Trade Commission was allowed to move forward with an antitrust lawsuit against Facebook parent Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report after previously being told it didn’t have enough evidence. Shares were off.
Take-Two Interactive (TTWO) – Get Take-Two Interactive Software, Inc. Report rose 5.2% after analysts at BMO Capital Markets boosted their rating on the stock following its planned takeover of Farmville maker Zynga (ZNGA) – Get Zynga Inc. Class A Report.
Global oil prices extended gains Wednesday, lifting prices to the highest levels since November — and back to pre-Omicron levels — following a drop in domestic inventories and bets on near-term demand.
The Energy Department said domestic crude stockpiles fell by 4.6 million barrels last week, nearly triple the consensus forecast, while inventories at the key Cushing, Okla., delivery hub fell by 300,000 barrels.
WTI futures contracts for February delivery, which are tightly-linked to domestic gasoline prices, were marked $1.46 higher on the session at $82.68 per barrel.
Brent contracts for March, the global pricing benchmark, added 94 cents to trade at $84.66 per barrel.
In Europe, the region-wide Stoxx 600 was marked 0.64% higher, while the MSCI Asia ex-Japan index gained 1.62% by the close of trading.
Related: Can the Federal Reserve Stop Inflation?