Stocks were rising Wednesday after key U.S. inflation data, which showed the highest year-over-year rise in inflation in 40 years.
Dow Jones Industrial Average
was up 165 points, or 0.5%, in Wednesday morning trading. The
added 0.7%, and the
gained 0.9%. It was a broad rally, with some 75% of the S&P 500’s components in the green.
The Consumer Price Index rose 0.5% in December from a month earlier, and the year-over-year increase surged to 7.0%, the Labor Department reported Wednesday. That annual gain is the fastest rate of inflation in the U.S. economy since mid-1982. Economists had been forecasting a 0.4% rise last month.
Core CPI, which excludes more volatile components of the index, increased 0.6% in December. That was also about a tenth of a percentage point above consensus. It brings the rate of increase in the core CPI to 5.5% year over year, the greatest since early 1991.
“Repeated upside surprises in the inflation data have sent the year-on-year numbers up to multidecade highs, putting significant pressure on the Fed,” said Jim Reid, a strategist at Deutsche Bank. “Indeed if you look at the monthly headline CPI reading, seven of the last nine releases have come in above the consensus estimate.”
The market’s strength is a continuation of Tuesday’s rally, one that was spurred by Federal Reserve Chair Jerome Powell’s confidence in the U.S. economy even as the central bank would act to curb high inflation. His words came after recent concerns in the market about tighter monetary policy. Last week, signals suggested the Fed was heading for earlier, faster interest-rate increases—at least three this year, with the first in March—and an eventual reduction of its balance sheet.
Helping the rally—especially in bond yield-sensitive tech stocks—was an easing-off among long-duration Treasury yields, which had spiked. The yield on the benchmark 10-year U.S. note has pulled back from its Covid-19 pandemic-era high of 1.8% and was hovering below 1.73% Wednesday; it began 2022 around 1.53%.
“The more positive tone appears to have come about as a result of the inability of U.S. treasury yields to build on their recent gains, after Powell insisted that while the Fed was going to start the ball rolling on a normalization process, that it would be a long process from where we are now,” said Michael Hewson, an analyst at broker CMC Markets.
rose 0.8%—capturing the highest levels seen since the Covid-19 crash of February 2020—while the pan-European Stoxx 600 index added 0.7%.
In Hong Kong, the
Hang Seng Index
surged 2.8%. News that China’s total social financing had increased while inflation in the world’s second-largest economy had come in slower than expected helped buoy Asian markets, according to 22V’s Dennis DeBusschere. “China total social financing has hooked up and a credit impulse will follow, which should support some China levered Industrials that lagged significantly last year. It keeps an upward bias to commodity price as well,” he explains.
In commodities, oil prices consolidated gains that came in tandem with Powell’s message Tuesday. Futures contracts for international oil benchmark Brent were above $84 a barrel, having begun the week at $81.50. U.S. futures for West Texas Intermediate crude rose to above $82.
“Oil prices rocketed higher overnight as the Powell testimony removed the threat of early rate hikes, for now,” said Jeffrey Halley, an analyst at broker Oanda. This has allowed fundamentals to reassert themselves: constrained production among OPEC+ members—the group of oil-producing nations including Russia and Saudi Arabia—and optimism over the Omicron variant of coronavirus.
“This sets the scene for more gains in the week ahead, having traded sideways the past few sessions as equity markets have corrected lower,” Halley added.
Cryptocurrencies were also higher.
—the leading crypto—rose 4% over the last 24 hours, according to data from CoinDesk, trading just below $44,000. Smaller peer
was up almost 7% across the same period to above $3,350.
Here are eight stocks on the move Wednesday:
Biogen (BIIB) stock slumped 9.5% after the CMS said only people enrolled in trials should receive its Alzheimer’s drug. Shares of Eli Lilly (LLY), which is working on a similar drug, fell 4.2%.
(DIDI) gained 1.3% on reports that it could list in Hong Kong during the second quarter of 2022.
Rocket Lab USA
(RKLB) stock jumped 5.1% after Morgan Stanley picked up coverage of the space launch startup with a Buy-equivalent rating.
(SNOW) stock added 3.9% after it was upgraded to the equivalent of Buy, from the equivalent of Hold, at Barclays. Shares of the software company have tumbled lately in the broader technology stock selloff.
(DASH) stock rose 2.3% after being upgraded to the equivalent of Buy, from the equivalent of Hold, at Evercore ISI. Like Snowflake, the food delivery company’s shares have tumbled lately.
(DISH) rose 4.5% after the New York Post reported that it is once again in talks about a merger with DirecTV, which is majority owned by
Dutch health conglomerate
(PHG) dropped 15% following the release of preliminary fourth-quarter sales showing revenue of approximately €4.9 billion ($5.6 billion), below expectations of €5.2 billion, largely due to supply-chain issues. Quarterly earnings are expected to also be lower than estimates.