Small changes on Wall Street. Higher-than-expected inflation in focus

Luc Williams

The Dow Jones Industrial was up 0.04% at the close. and amounted to 37,711.02 points. The S&P 500 fell by 0.07% at the end of the day. and amounted to 4,780.24 points. Despite a slight decline during Thursday’s session, the S&P 500 index is close to the record closing level of 4,796.56 points, which was achieved at the beginning of January 2022. The S&P 500 has recovered almost 17%. from their October lows. The Nasdaq Composite did not change and closed the session at 14,970.18 points. The Russell 2000 small-cap index fell 0.78 percent to 1,954.90 points. The VIX volatility index fell by 1.81%, to 12.46 points.

“The growth momentum in core service prices net of rents has reversed again.”

Investors analyzed the inflation reading in the US, which amounted to 3.4% in December. on a y/y basis, and m/m was 0.3%. 3.2 percent was expected. y/y and 0.2 percent mdm. Core inflation, i.e. an indicator that does not take into account fuel and food prices, was 0.3%. mdm and 3.9 percent rdr. 0.3 percent was expected. mdm and 3.8 percent rdr.

The number of people applying for unemployment benefits for the first time last week in the US was 202,000. 210 thousand were expected. compared to 203 thousand previously, after correction from 202 thousand Money markets are pricing in the likelihood of an interest rate cut for March. in the US by 25 bp. at 65 percent and 96 percent chances of a rate cut in May.

JPMorgan Asset Management indicated that the Fed may decide to cut interest rates to a greater extent than it is currently signaling as the dynamics of the American economy slows down, which leads to a rally in shorter-term Treasury bonds. “December CPI with a slight upward surprise (0.3% vs. 0.2% m/m), but core inflation is already in line with the consensus of 0.3% m/m. We may be pleased that the momentum in the increase in base prices of services excluding rents has turned around again,” mBank economists said after the publication.

Inflation readings from the United States are important for the markets in the context of further developments in interest rates in this country. Investors currently value 63%. the likelihood of the first rate cut already in March, according to the CME FedWatch tool. “Today’s inflation report reinforces our belief that calls for the Federal Reserve’s first interest rate cut in March are premature,” said Matthew Ryan, head of market strategy at Ebury, in a note.

This week begins the season of US companies publishing their fourth quarter results

“Following a dovish shift in Fed rhetoric in December, financial markets began to price in a U.S. interest rate cut already in March. However, the tight labor market situation and today’s higher-than-expected inflation data suggest that this is unlikely unless to an economic or financial shock. We still believe that the Fed will prefer to wait until May,” ING economists forecast.

Cryptocurrency-related stocks such as Coinbase and Riot Platforms rose several percent each after the U.S. Securities and Exchange Commission on Wednesday approved for the first time trading ETFs that invest directly in bitcoin on the spot market. Citigroup fell almost 2%. following a filing that saw the lender set aside about $3.8 billion for fees and reserves, which could reduce its fourth-quarter earnings.

This week begins the season of US companies publishing their fourth quarter results. On Friday, investors will learn about the achievements of Bank of America, Wells Fargo and JPMorgan Chase. “The results should increase investor enthusiasm. We are in a nervous pre-earnings period, as on December 31 earnings were expected to increase 2.1% in the final quarter and are now expected to increase 1.7%. ” – said Sam Stovall, chief investment strategist at CFRA.

February WTI futures are trading at $72.33 a barrel, up 1.35%, and March Brent futures are up 1.25%. up to USD 77.76/b.


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