Wall Street closes higher as inflation data supports Fed betting

January 12 (Reuters) – US stock indices rose on Wednesday after data showed that while US inflation was at its highest in decades, it largely lived up to economists’ expectations, cooling some fears that the Federal Reserve would become have to withdraw support even more by force than already expected.

Ten out of the 11 major S&P sectors ended higher after the news with the S&P 500 and Nasdaq outperforming the Dow as growth stocks outperformed the value.

Data from the Ministry of Labor showed that the consumer price index (CPI) rose 0.5% last month after rising 0.8% in November, while the consumer price index in the 12 months to December rose by 7.0% to its highest year-to-date -year-increase for almost four decades. Read more

Economists polled by Reuters had predicted a CPI rise of 0.4% for December and 7.0% year-on-year.

“Investors were preparing for even hotter inflation than we actually saw. As bad as the number is, and as much inflationary pressure there is in the economy, there was little relief in that,” said Anthony Saglimbene, Ameriprise Financial’s global market strategist in Troy. , Michigan.

“Today’s inflation report validates the Fed’s path and means they do not have to be more aggressive than has already been priced in.”

The central bank’s plan to facilitate accommodation to combat inflation includes raising interest rates, which analysts expect to start as early as March, as well as phasing out its bond-buying program and reducing its asset portfolio. Read more

For most equities, it also helped that long-term U.S. government interest rates fell on Wednesday. In recent weeks, sharp rises in US 10-year yields had weighed on equities, particularly in price-sensitive growth sectors such as technology.

“The fact that bond market interest rates are falling is probably a signal for equity investors to take on a little more risk today,” said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.

But with the small cap Russell 2000 index (.RUT) underperformed to end down by 0.82%, Ablin saw some caution.

“Equity investors still want quality. It’s not free for everyone,” Ablin said.

Dow Jones Industrial Average (.DJI) rose 38.3 points or 0.11% to 36,290.32, S&P 500 (.SPX) rose 13.28 points or 0.28% to 4,726.35 and the Nasdaq Composite (.IXIC) added 34.94 points, or 0.23%, to 15,188.39.

S & P’s top sector winners of the day were materials (.SPLRCM), an increase of almost 1%, estimated by the consumer (.SPLRCD), an increase of 0.6% and technology (.SPLRCT) which rose 0.4 per cent.

Growth and technology stocks have made a comeback this week, with investors looking at a variety of measurements to decide whether to buy the rally or prepare for more falls.

Also on the watch list for this week is the unofficial kick-off for the fourth quarter earnings season with JPMorgan Chase & Co (JPM.N), Citigroup Inc (CN) and Morgan Stanley (MS.N) to report their results on Friday. Read more

Dow’s biggest move of the day was Goldman Sachs (GS.N), which fell 3% and Morgan Stanley (MS.N) fell 2.7% on the day as their minor rival Jefferies (JEF.N) fell 9% after missing quarterly expectations.

Both Goldman and Morgan Stanley, like Jefferies, are heavily dependent on their capital market business. Both Morgan Stanley and Goldman were also in the top five moves on the S&P 500 that day. However, the broader banking sector, which includes more traditional lenders, rose 0.3% on Wednesday.

However, in sectors such as air travel, rising cases of the Omicron variant of coronavirus could dampen earnings expectations, with analysts at Bank of America (BAC.N) reckons that the impact of the pandemic on business travel is the greatest risk to the aviation industry. Read more

The health index (.SPXHC), was weighed down by shares in drug maker Eli Lilly (LLY.N), which closed 2.4% and was the largest single weight on S&P and Biogen (BIIB.O), which lost 6.7 per cent.

The U.S. government’s Medicare program said that even if it plans to cover Biogen’s Aduhelm Alzheimer’s treatment, it will require patients to be enrolled in a clinical trial, limiting access to the drug. This may also affect Eli Lilly, who is developing similar drugs. Read more

The biggest boost to S&P on the day was Tesla (TSLA.O) an increase of 3.9% ahead of Microsoft (MSFT.O) Google’s parent alphabet (GOOGL.O), both of which rose more than 1 per cent.

Advancing issues exceeded declining on the NYSE by a ratio of 1.26 to 1; on the Nasdaq favored a ratio of 1.37 to 1 folders.

The S&P 500 released 38 new 52-week highs and 1 new low; The Nasdaq Composite recorded 60 new highs and 137 new lows.

On US stock exchanges, 10.251 billion shares changed hands compared to the average of 10.449 billion for the last 20 sessions.

Reporting by Bansari Mayur Kamdar, Shreyashi Sanyal and Anisha Sircar in Bengaluru, Sinéad Carew and Matt Scuffham in New York; Edited by Maju Samuel and Aurora Ellis

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