U.S. Stocks Move Mostly Higher Following Inflation Data

Stocks moved mostly higher over the course of the trading day on Thursday, extending the upward trend seen over the past several sessions. The major averages saw substantial volatility early in the session but climbed firmly into positive territory as the day progressed.

The major averages finished the day off their highs of the session but held on to gains. The Dow advanced 216.96 points or 0.6 percent to 34,189.97, the Nasdaq climbed 69.43 points or 0.6 percent to 11,001.10 and the S&P 500 rose 13.56 points or 0.3 percent to 3,983.17.

With the upward move, the Dow ended the session at its best closing level in over a month, while the Nasdaq and S&P 500 reached one-month closing highs.

The strength that emerged on Wall Street came following the release of highly anticipated consumer price inflation data, which largely came in line with economist estimates.

The Labor Department said its consumer price index edged down by 0.1 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to come in unchanged.

The report also showed the annual rate of consumer price growth slowed to 6.5 percent in December from 7.1 percent in November, in line with expectations. The annual growth was the slowest since October 2021.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in December following a 0.2 percent uptick in November. The increase matched economist estimates.

The annual rate of core price growth slowed to 5.7 percent in December from 6.0 percent in November. The year-over-year growth was also in line with expectations.

The slower price growth eased concerns about the outlook for interest rates, although the Federal Reserve is still widely expected to raise rates by at least 25 basis points at its next meeting.

“Overall, this latest report adds more weight to our view that CPI inflation will fall more rapidly than the Fed expects this year,” said Paul Ashworth, Chief North America Economist at Capital Economics.

“But the Fed isn’t going to stop raising interest rates until it sees accompanying evidence of an easing in labor market conditions and wage growth,” he added. “It will be a couple more months before that evidence is also irrefutable.”

The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended January 7th.

The report said initial jobless claims slipped to 205,000, a decrease of 1,000 from the previous week’s revised level of 206,000.

The dip surprised economists, who had expected jobless claims to rise to 215,000 from the 204,000 originally reported for the previous week.

With the modest decrease, initial jobless claims fell to their lowest level since hitting 190,000 in the week ended September 24th.

Sector News

Airline stocks showed a substantial move to the upside over the course of the session, with the NYSE Arca Airline Index soaring by 4.1 percent to its best closing level in well over four months.

American Airlines (AAL) helped lead the sector higher, spiking by 9.7 percent after boosting its fourth quarter guidance.

Significant strength was also visible among energy stocks, which benefited from a continued increase by the price of crude oil.

With crude for February delivery jumping $0.98 to $78.39 a barrel, the Philadelphia Oil Service Index and the NYSE Arca Oil Index surged by 2.5 percent and 2.1 percent, respectively.

Steel, natural gas and gold stocks also moved notably higher on the day, while considerable weakness was visible among computer hardware stocks

A steep drop by Logitech (LOGI) weighed on the computer hardware sector, with the software and computer peripherals maker plummeting by 16.9 percent after cutting its sales outlook.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region moved modestly higher during trading on Thursday. Japan’s Nikkei 225 Index closed just above the unchanged line, while China’s Shanghai Composite Index inched up by 0.1 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index advanced by 0.9 percent, the German DAX Index and the French CAC 40 Index both climbed by 0.7 percent.

In the bond market, treasuries moved sharply higher after seeing considerable volatility early in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.5 basis points to 3.449 percent.

Looking Ahead

Earnings news may move into the spotlight on Friday, with financial giants Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) among the companies due to report their quarterly results before the start of trading.

A report on import and export prices in December may also attract attention along with preliminary data on consumer sentiment in January, which includes readings on inflation expectations.

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