Wednesday January 12th


Stock futures gain as December CPI report comes in about as expected

U.S. stock index futures moved slightly higher on Wednesday after a key inflation report showed a historic gain but largely matched expectations. Futures on the Dow Jones Industrial Average rose 144 points. S&P 500 futures gained 0.5%, and Nasdaq 100 futures rose about 0.7%. The moves come after the December reading for the consumer price index, a gauge of prices across a broad spectrum of goods, showed a gain of 7% year over year. That is the biggest jump since 1982, but was in-line with expectations from economists surveyed by Dow Jones. The monthly increase was slightly hotter than expected. “Fears about higher and persistent inflation have been well telegraphed in recent months. Therefore, investors had been expecting the rate of inflation to rise. Today’s rise in the rate of inflation falls within investors’ expectations,” Richard Flynn, Managing Director at Charles Schwab UK, said in a note. Some economists think inflation could be showing signs of peaking, so the report will be looked at closely for the longer-term trend. Though CPI is not the Federal Reserve’s primary inflation gauge, policymakers are watching a variety of measures as they embark on the first stages to tightening the most accommodative policy measures in the central bank’s history. Fed Chairman Jerome Powell told Senate lawmakers Tuesday that he expects interest rate increases this year along with the end of the monthly bond-buying program in March and a reduction in asset holdings. Powell said the moves likely will be needed to control inflation at a time when the economy has recovered substantially from the pandemic shock. “The anxiety relating to the Fed’s recent hawkish tilt and the outlook for higher rates seems to have calmed a tad (at least for now), leaving investors fishing for opportunities in pockets that saw the deepest cuts in recent weeks,” Chris Hussey, a managing director at Goldman Sachs said in a note. In individual stocks, Dish Network jumped 7.4% in premarket trading following news that the company is again in merger talks with DirectTV, according to sources who spoke with the New York Post. Reopening stocks also gained, with Norwegian Cruise Lines up 1.9% and Hilton Worldwide Holdings rising 1.2%. On the downside, Biogen shares tumbled nearly 10% following news that Medicare will only cover the cost for the company’s Alzheimer’s drug Aduhelm for patients with early-stage symptoms who are enrolled in clinical trials. The market moves come a day after a rally on Wall Street as investors bought the dip following a five-day sell-off in the S&P 500. On Tuesday, the tech-heavy Nasdaq Composite gaining more than 1% for a second straight day of gains. The S&P 500 rose 0.9%, snapping a five-day slide, while the blue-chip Dow added 180 points. Technology shares have suffered a steep sell-off in the new year after the Federal Reserve signaled a faster-than-expected tightening schedule. Many bet that the market could see the first interest-rate hike as soon as March. Bond yields, which spiked to start 2022, stabilized on Tuesday with the10-year Treasury yield slipping to 1.76% after topping the 1.8% level earlier in the week. “I’m not sure the inflation data tomorrow is going to put investors’ minds at ease, with CPI seen hitting a multi-decade high above 7%,” said Craig Erlam, senior market analyst at Oanda. “A higher reading could spook investors once again just as equity markets appear to be stabilizing.” Meanwhile, big banks will kick off the fourth-quarter earnings season on Friday. JPMorgan Chase, Citigroup and Wells Fargo are slated to release quarterly results before the bell. Chinese markets rose on Wednesday, tracking gains in other Asia-Pacific markets. U.S. markets also rallied overnight as comments from the Fed chief appeared to reassure investors. Hong Kong’s Hang Seng index led gains in the region, as it jumped 2.79% to close at 24,402.17. The Hang Seng tech index soared nearly 5%. Mainland Chinese markets also rose, as the Shanghai composite was up 0.84% to close at 3,597.43, and the Shenzhen component rose 1.39% to 14,421.19. Japan’s Nikkei 225 jumped 1.92% to close at 28,765.66, while the Topix was up 1.64% to 2,019.36. South Korea’s Kospi rose 1.54% to 2,972.48, and the Kosdaq jumped 2.21% to 991.33. Oil prices steadied on Wednesday after rising in the previous session on expectations that fuel demand will continue to strengthen as the U.S. Federal Reserve is likely to raise interest rates more slowly than expected. Brent and U.S. crude oil futures are trading at their highest since the highly contagious Omicron COVID-19 variant emerged in late November has not impacted fuel demand the way previous variants did. U.S. West Texas Intermediate (WTI) crude futures rose 74 cents, or 0.9%, to trade at $81.96 per barrel, adding to a 3.8% jump in the previous session. Brent crude futures were up 56 cents at $84.27 a barrel, after jumping 3.5% in the previous session. Gold prices retreated on Wednesday ahead of U.S. inflation data that could provide further direction on U.S. monetary policy after comments from the Federal Reserve Chair lifted bullion in the last session. Spot gold was down 0.3% at $1,817.11 per ounce at 1147 GMT, after posting its biggest one-day percentage rise since mid-December on Tuesday. U.S. gold futures were down 0.1% at $1,817.20.