US stocks rise after a fall in consumer price data

 

US stocks advanced Thursday after December’s consumer price report showed inflation cooled for the month, raising hopes the Federal Reserve can once again slow interest rate hikes.

The Dow Jones Industrial Average gained 0.6 per cent. The S&P 500 added 0.3 per cent. The Nasdaq Composite is up 0.6 per cent as it attempts to post a five-day winning streak, which would be a first for the technology-heavy index since July.

Most US sectors were higher in Thursday trading. Energy was the standout as crude extends the week's gains, with E&Ps and oilfield services among best performers. Airlines rallied after AAL-US 's update included an increase in Q4 revenue and TRASM guidance.

In company related news, data from JPMorgan has revealed that retail traders have unloaded $746 million worth of Tesla shares over the past week, bringing the total outflow over the last three weeks to $2.1 billion. It comes even as investors piled back into stocks, buying $1.2 billion worth of equities in the past week. That included $157 million of Amazon shares and $102 million of Apple.

And meme stocks have been in focus this week. In particular, home retailer Bed Bath & Beyond has soared 60 per cent overnight as the company is at the helm of another short squeeze.
When assessing the week, the Nasdaq is on pace for the biggest weekly increase of the three indexes, gaining 3.8 per cent so far as investors picked up beaten-down growth stocks ahead of the CPI report.

The S&P 500 and Dow are also poised for weekly advances of 2.1 per cent and 1.5 per cent, respectively.

The moves came after a report from the Department of Labor showed annual consumer price growth in the US fell to 6.5 per cent in December, down from 7.1 per cent in November and broadly in line with economists’ expectations.

The closely watched “core” measure of inflation, which strips out volatile food and energy prices, clocked in at a rate of 5.7 per cent, down from 6 per cent the previous month. The latest figures raised expectations that the Fed will further slow the pace of its interest rate rises with a 0.25 percentage point increase at its next policy meeting at the end of January. Last month the central bank lifted rates 0.5 percentage points after a string of larger 0.75 percentage point Increases.

US government bonds rallied across the board, with the yield on the two-year Treasury note, which is particularly sensitive to interest rates, falling 0.1 percentage points to 4.13 per cent. The yield on the benchmark 10-year Treasury note fell 0.11 percentage points to 3.44 per cent. Bond yields fall when prices rise.

Stocks have rallied in recent sessions as investors bet the CPI report would confirm a weakening inflation trend. Investors have watched in recent months for data signalling cooling inflation in hopes it can give the Fed justification for further slowing interest rate hikes.

Boston Fed President Susan Collins said in an interview with the New York Times Wednesday that she’s leaning toward a smaller, quarter-percentage-point rate hike at the next meeting. Investors will further parse remarks to be given by Collins and two other senior Fed officials on Friday.

Big banks including JPMorgan, Bank of America, Citigroup and Wells Fargo are set to report quarterly earnings Friday. Delta Air Lines is also slated to report.

To commodity related news, Trafigura Group stated that geopolitical shocks could trigger a surge in metals prices because the market has never been tighter. Jeremy Weir, the commodity trader's chief executive officer, believes that the prices could be pushed into extreme levels and that there is a need to address this problem now.

And the German government faces a dilemma over what to do with the gas that it bought unhedged and stored underground last summer, with far-reaching consequences for the wholesale gas market.
In a move that wound back years of market reform, German gas market area manager THE, on behalf of the government, bought and injected into storage about 50TWh of gas last summer. The recent price drop means any gas that THE withdraws now would be worth significantly less than what the market area manager paid to inject it. And this substantial trading loss will be passed on to German customers through a gas storage levy introduced for this purpose.

Sweden’s state-owned mining company LKAB has said it has discovered Europe’s largest deposit of rare earth metals. The discovery bolsters the continent’s ambition to rely less on imported raw materials needed for the green transition. The deposit, dubbed Per Geijer, is located north of the Arctic Circle in Sweden’s province of Lapland and contains more than 1mn tonnes of rare earth oxides — the largest known deposit of its kind in Europe, the company said.

The SPI futures are pointing to a rise of 34 points.

Figures around the globe

European markets closed higher. Paris rose 0.74 per cent, Frankfurt gained 0.74 per cent and London’s FTSE closed 0.89 per cent higher.

Asian markets closed higher. Tokyo’s Nikkei gained 0.01 per cent, Hong Kong’s Hang Seng gained 0.36 per cent and China’s Shanghai Composite closed 0.05 per cent higher.

Yesterday, the Australian sharemarket added 1.18 per cent to close at 7,280.40.

Commodities and the dollar

Oil is trading 0.92 per cent higher at US$78.12 a barrel.
Gold is trading 1.12 per cent higher at US$1,899.90 an ounce.
Silver is trading 1.91 per cent higher at US$23.93 an ounce.
Copper is trading 0.16 per cent higher at US$417.25 a pound.
Iron ore futures are pointing to a rise of 0.93 per cent.
One Australian dollar is buying 69.67 US cents.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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