US inflation has been running at the fastest pace since February 1982, or in about 40 years. But Wall Street is not going down today, at least for now. The Dow Jones rose 0.41% to 36,401 points; the S&P 500 is up 0.45% to 4,734, the Nasdaq is + 0.56% to 15,246.
Accustomed to dreading the worst by now, investors almost breathed a sigh of relief as they realized that inflation picked up pace in December, but not at a much faster rate than expected.
In fact, last month, inflation measured by the US consumer price index jumped further, to an annual rate of 7%, compared to + 6.8% in November. Analysts interviewed by Dow Jones had predicted a 7% jump year-on-year, the strongest rate since 1982, in fact.
On a monthly basis, however, the growth was higher than expected, equal to + 0.5%, compared to the + 0.4% expected. More than expected was also the annual rise in the core component of the data, that is the index adjusted for the prices of food and energy goods, core inflation, advanced by 5.5%, compared to the previous + 4.9%, against the + 5.4% expected.
Finally, more than expected, the growth in core inflation on a monthly basis, equal to + 0.6%, against the + 0.4% expected.
That inflation continues to run is a fact. However, the hope is that its peak is near, as some economists interviewed by Cnbc also pointed out.
Among them Luke Tilley, chief economist at Wilmington Trust, said that, “at some point over the next two months, inflation will have tested its peak, either in December or during the first quarter. inflation will slow down in 2022. We therefore expect prices to rise more slowly in 2022 than they did in 2021 “.
Wall Street therefore rises, continuing on the path of earnings after yesterday’s positive trend.
Inflation continues to haunt market participants, and the Fed itself, which is confirmed to be more hawkish than expected: yesterday, in his hearing at the Banking Commission of the US Senate, the number one of the Federal Reserve Jerome Powell reiterated that the economy American is in a position to support a more restrictive monetary policy.
“Over the course of this year … if the situation develops as expected, we will normalize (monetary) policy, which means that we will end our asset purchases in March, which means that we will raise rates over the course of the year. ‘year – said Powell – At some point, perhaps towards the end of this year, we will begin to reduce the budget, and this is simply the way to normalize the policy “.
“If we see that inflation persists at high levels for a longer period of time than expected – added Powell – so if we have to raise rates more, then we will. We will use all our tools to bring inflation back” at levels considered acceptable.
That said, after the wave of sell-offs that hit the markets, Wall Street seems to be starting to digest the prospect of rate hikes over the course of the year.
Nasdaq recovered yesterday, gaining 1.41% to 15,153.45 points. The S&P 500 also did well, up 0.92% to 4,713.07 points, while the Dow Jones Industrial Average posted an increase of 183.15 points (+ 0.51%), to 36,252.02 points.
Stabilization of Treasury rates, with 10-year rates falling to 1.73%, after having soared to over 1.80% in the last few sessions. Yields fell to 1.72% this morning.