Wall Street is drifting near its record Thursday after a report showed U.S. inflation is warmer than expected, but maybe not by enough to dash traders’ dreams of lower interest rates later this year. The S&P 500 was close to flat in early trading at 4,785, just below its all-time high of 4,796.56 set two years ago. The Dow Jones Industrial Average was down 24 points, or 0.1%, and the Nasdaq composite was 0.2% higher.
Quick Read
- Wall Street Near Record Levels: Wall Street is hovering close to its record highs, with the S&P 500 near flat, the Dow Jones down slightly, and the Nasdaq composite slightly up.
- Expectations of Interest Rate Cuts: The market had been optimistic about potential interest rate cuts by the Federal Reserve, spurred by expectations of cooling inflation.
- December Inflation Report: The U.S. inflation report for December showed a 3.4% increase in overall consumer prices compared to the previous year, slightly higher than anticipated.
- Core Inflation Trends: Core inflation, excluding food and fuel, matched expectations, suggesting that overall inflation is cooling, although not consistently.
- Impact on Rate Cut Forecasts: The inflation data might push back expectations for the timing of the Federal Reserve’s first rate cut, but hopes remain for gradual cooling of inflation and avoidance of a severe recession.
- Response in Treasury Yields: The 10-year Treasury yield initially rose after the inflation report but experienced fluctuations, indicating uncertainty in rate cut timing.
- Oil Prices Influence: Oil prices increased, applying upward pressure on inflation and yields. U.S. crude and Brent crude saw significant gains.
- Energy Sector Activity: Chesapeake Energy’s stock jumped after announcing its sale to Southwestern Energy, while Southwestern’s stock saw a slight decline.
- Bitcoin’s Growth: Bitcoin’s value increased following U.S. regulators’ approval for the trading of exchange-traded funds holding the digital currency.
- International Market Performance: Global markets showed mixed responses, with Tokyo’s Nikkei 225 reaching its highest finish since 1990.
The Associated Press has the story:
Wall Street drifts near its record following inflation update
Newslooks- NEW YORK (AP) —
Wall Street is drifting near its record Thursday after a report showed U.S. inflation is warmer than expected, but maybe not by enough to dash traders’ dreams of lower interest rates later this year.
The S&P 500 was close to flat in early trading at 4,785, just below its all-time high of 4,796.56 set two years ago. The Dow Jones Industrial Average was down 24 points, or 0.1%, and the Nasdaq composite was 0.2% higher.
Stocks roared into the end of last year on rising expectations that a cooldown in inflation would get the Federal Reserve to cut interest rates sharply, which can boost prices for investments. Thursday morning’s inflation report was seen as a test of whether Wall Street’s hopes had gone overboard.
It showed U.S. consumers paid prices that were 3.4% higher overall in December than a year earlier. That’s an acceleration from November’s 3.1% inflation rate and a touch warmer than economists expected.
But trends underneath the surface may have been more encouraging. After stripping out food and fuel prices, which can shift sharply from month to month, the rise in prices from November into December roughly matched economists’ expectations.
Altogether the data will likely cause traders to push back forecasts for the timing of the first cut to rates, several analysts said, but they don’t preclude the central hopes that have sent stocks near records: Inflation is cooling, albeit in a jagged way, and the economy looks likely to avoid a bad recession.
“Today’s inflation report reinforces the notion that the market had gotten a little overexcited around the timing of rate cuts,” said Seema Shah, chief global strategist at Principal Asset Management. “These are not bad numbers, but they do show that disinflation progress is still slow and unlikely to be a straight line down to 2%.”
Treasury yields rose immediately after the inflation report as traders trimmed bets that the first cut to rates will arrive as soon as March. But they wobbled soon after that.
The yield on the 10-year Treasury rose to 4.03% from 3.98% shortly before the report’s release, but it was still down from its 4.04% level late Wednesday. Lower yields relax the pressure on the stock market, and the 10-year yield is down sharply from 5% in October.
A jump in oil prices put some upward pressure on inflation and yields, as they trimmed their sharp losses from earlier in the week. A barrel of benchmark U.S. crude rose 2.2% to $72.95. Brent crude, the international standard, gained 1.9% to $78.24.
Also in the energy industry, natural-gas producer Chesapeake Energy jumped 3.9% after it agreed to sell itself to Southwestern Energy in an all-stock deal valued at $7.4 billion. Southwestern slipped 0.9%.
In cryptocurrencies, bitcoin was up to roughly $49,000 a day after U.S. regulators allowed for the trading of the first exchange-traded funds that hold the digital currency rather than just futures related to it.
In stock markets abroad, indexes were mixed.
Tokyo’s Nikkei 225 rose 1.8% to its highest finish since February 1990, when Japan’s bubble economy of inflated real estate and stock prices was beginning to deflate.
