(Bloomberg) — Stocks climbed as a report showing the fastest inflation in about four decades was roughly in line with market expectations.
The S&P 500 rose for a second day, while the technology-heavy Nasdaq 100 outperformed major benchmarks. The dollar fell alongside Treasury yields. The consumer price index jumped 7% in 2021, matching the median forecast in a Bloomberg survey of economists. The inflation gauge rose 0.5% from November, slightly faster than the 0.4% projection.
“Fears about higher and persistent inflation have been well telegraphed in recent months,” said Richard Flynn, managing director at Charles Schwab U.K. “Today’s rise in the rate of inflation falls within investors’ expectations.”
The data bolster bets the Federal Reserve will start raising interest rates in March, a sharp policy adjustment from the timeline projected just a few months ago. High inflation has proven more stubborn and widespread than the central bank predicted amid unprecedented demand for goods along with capacity constraints related to the supply of both labor and materials.
More comments:
- “Bond markets are currently pricing in about a 90% probability that the Fed delivers four rate hikes in 2022, and today’s inflation data should not dissuade the central bank from delivering the first of those hikes in March,” said Jai Malhi, global market strategist at J.P. Morgan Asset Management.
- “This morning’s CPI read really only solidifies what we already know — consumer wallets are feeling pricing pressures and in turn the Fed has signaled a more hawkish approach,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley.
- “There was a fear that inflation was going to come in hotter-than-expected for the month of December, and it essentially met expectations,” Emily Roland, co-chief investment strategist at John Hancock Investment Management, told Bloomberg Television. “The key question is, for those that are expecting higher inflation readings to really continue throughout the year, will those expectations be met?”
Dish Network Corp. rallied after a news report that the pay-television provider is in merger talks with DirecTV. Bed Bath & Beyond Inc. jumped, boosted by disclosures of insider purchases of the retailer’s stock made on Jan. 7. Biogen Inc. sank after the U.S. government limited Medicare coverage of the company’s Aduhelm Alzheimer’s disease treatment and similar drugs to patients enrolled in clinical trials.
Here are some key events this week:
- U.S. initial jobless claims, PPI on Thursday.
- U.S. Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair on Thursday.
- Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker,
- Chicago Fed President Charles Evans speak on Thursday.
- Bank of Korea policy decision and briefing on Friday.
- Wells Fargo, Citigroup, JPMorgan due to report earnings on Friday.
- U.S. business inventories, industrial production, University of Michigan consumer sentiment, retail sales on Friday.
- New York Fed President John Williams speaks Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.4% as of 9:30 a.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 0.9%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.4% to $1.1411
- The British pound rose 0.4% to $1.3685
- The Japanese yen rose 0.2% to 115.11 per dollar
Bonds
- The yield on 10-year Treasuries declined two basis points to 1.72%
- Germany’s 10-year yield declined five basis points to -0.08%
- Britain’s 10-year yield declined five basis points to 1.12%
Commodities
- West Texas Intermediate crude rose 0.8% to $81.83 a barrel
- Gold futures rose 0.2% to $1,821.90 an ounce
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