Stocks Edge Higher After Inflation Data
5:04 pm Wednesday, January 12th, 2022
World stocks bounced on Wednesday while U.S. Treasury yields dipped after the latest U.S. inflation data showed price pressures are surging but still within expectations, reinforcing bets the Federal Reserve will soon be raising interest rates.
The biggest support in the S&P 500 is the top-weighted information technology sector, which is up a sector-best 0.7%. Four sectors trade lower, including energy (-0.2%) and health care (-0.4%) at the bottom of the standings.
Specifying the data, the Consumer Price Index rose 0.5% m/m in December (consensus 0.4%) while the core index, which excludes food and energy, rose 0.6% (consensus 0.5%). On a year-over-year basis, they were up 7.0% and 5.5%, respectively.
The report has stirred inflation concerns, but the reaction in the Treasury market is suggesting that inflation-rate expectations could be peaking because of the Fed’s plans to tighten policy more aggressively. The inflation-sensitive 10-yr yield is down four basis points to 1.71% while the 2-yr yield trades flat at 0.90%.
The decline in the 10-yr yield has provided a lift for the mega-caps, which are outweighing the softness in the broader market. The Vanguard Mega Cap Growth ETF (MGK) trades higher by 0.7% while the Invesco S&P 500 Equal Weight ETF (RSP 162) trades flat.
In corporate news, shares of Biogen (BIIB) are down 7% after Medicare officials proposed to limit coverage of the company’s Alzheimer’s treatment to only those patients that participated in approved clinical trials. Jefferies (JEF) is down 11% following its mixed earnings report.
Elsewhere, oil prices are trading above $83 per barrel after the EIA reported a larger-than-expected draw in weekly crude inventories (4.55 mln barrels). That was the seventh straight weekly draw, pointing to healthy demand despite the Omicron variant.
Total CPI rose 0.5% month-over-month in December (consensus 0.4%) and was up 7.0% year-over-year. This represented the sharpest 12-month increase since June 1982. Core CPI, which excludes food and energy, rose 0.6% month-over-month (consensus 0.5%) and was up 5.5% year-over-year. This was the sharpest 12-month increase since February 1991.
