U.S. stock benchmarks climbed Friday, and headed toward a gain for the week, with the S&P 500 index trading near its record high, as investors digested data that showed consumer prices in November rose by the most in nearly four decades ahead of the Federal Reserve’s monetary-policy meeting next week.
How are stock indexes trading?
The Dow Jones Industrial Average
advanced 176 points, or 0.5%, to about 35,931.
The S&P 500 index SPX was up 36 points, or 0.8%, at almost 4,704, after touching an intraday peak at 4,705.38, above its Nov. 18 record closing high at 4,704.54. The index touched an intrasession nadir at 4,670.24.
The Nasdaq Composite Index
rose almost 77 points, or 0.5%, to 15,594.
On Thursday, the Dow fell in the final moments of trading, dropping 0.06 point to 35,754.69, while the S&P 500 slipped 0.72% to 4,667.45 and the Nasdaq Composite, meanwhile, slid 269.62 points or 1.71% to 15,517.37, marking its worst daily decline since Dec. 3.
What’s driving the markets?
Investors were interpreting the latest consumer inflation data as not as bad as the worst-case-scenario for Wall Street.
Data released ahead of the stock market open on Wall Street showed November consumer price inflation rose 6.8% annually, slightly higher than expectations for a rise of 6.7% by a poll of economists by The Wall Street Journal. It marks the fastest annual inflation rate since 1982.
“If you look at the number on the surface, it certainly looks like it came in hot,” said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions, in a phone interview Friday. While the inflation print was “a little bit above” forecasts by economists, the “whisper” going through markets yesterday was for a much stronger level, he said.
Also, President Joe Biden’s statement Thursday that Friday’s report on consumer prices wouldn’t reflect a drop in energy prices since the data was collected helped build expectations for a stronger inflation reading, according to Janasiewicz. Some investors may have taken Biden’s remarks as an effort to “soften the blow” of a potentially higher-than-anticipated print from the consumer price index, he said.
The cost of living rose 0.8% on the month, just ahead of expectations for a 0.7% gain. Core inflation, which strips out food and energy costs, jumped 0.5% in November as expected, while core inflation year-over-year in November rose 4.9%.
“The initial reaction has seen the US dollar fall and stocks rise with high growth tech stocks leading the charge; moves consistent with easing hawkish Fed expectations,” Fiona Cincotta, senior financial markets analyst at City Index, said in a market brief.
and information technology
were showing the strongest gains among the S&P 500 index’s sectors in Friday afternoon trading, according to FactSet data, at last check.
The consumer inflation report now sets the stage for the Federal Reserve’s policy meeting next week, after Fed Chair Jerome Powell recently telegraphed the central bank’s plans to consider tapering its monthly bond purchases at a faster pace.
“For policy, this report increases the probability that the Fed will announce an accelerated tapering at its December meeting, which markets are already expecting,” wrote Alex Pelle, U.S. economist at Mizuho, in a Friday note.
“At the current pace of inflation, the economy would be on track to average 2% inflation over two business cycles (since the Great Financial Crisis) by next year,” Pelle wrote. “As such, we expect the December SEP ‘dot plot’ will show at least 2 hikes at the median in 2022, with a risk that it shows 3 hikes at the median for 2022,” the economist wrote, referring to the chart of the interest-rate projections from members of the Federal Open Market Committee.
The Fed will meet Dec. 14-15.
Meanwhile, consumer sentiment measured by the University of Michigan’s gauge rebounded in December to 70.4 from a final November reading of 67.4. Economists polled by The Wall Street Journal expected an index reading of 68.0.
“We’re still seeing it relatively muted relative to pre-pandemic levels,” said Michael Reynolds, vice president of investment strategy at Glenmede, in a phone interview Friday. That suggests consumers are “just not all that confident as they were perhaps prior to this environment.”
What companies are in focus?
Shares of Oracle Corp.
soared about 16% after the database giant reported forecast-beating fiscal second-quarter results.
Peloton Interactive Inc.
shares were down 6.9% after the maker of home-exercise equipment was cut to neutral from outperform at Credit Suisse, which slashed its price target to $50 from $112. Shares slid 11% on Thursday, amid publicity over a plot twist in the “Sex and the City” revival.
How are other assets trading?
The yield on the 10-year Treasury note
was little changed at 1.487% Friday, but rose about 14.5 basis points for the week. Treasury yields and prices move in opposite directions.
The ICE U.S. Dollar Index
a measure of the currency against a half-dozen other monetary units, was trading 0.2% lower Friday afternoon and was little changed for the week.
In Asia, the Shanghai Composite Index
closed 0.2% lower but booked a weekly gain of 1.6%, while the Hang Seng Index
fell about 1.1% in Hong Kong but remained up 1% for the week. China’s CSI 300
fell 0.5% but boasted a 3.1% weekly rally. Japan’s Nikkei 225 Index
closed down 1% but notched a 1.5% gain over the five-day period.
—Barbara Kollmeyer contributed to this article.