Stocks were little changed Friday after U.S. consumer prices rose even more than expected in November. Markets have already been reflecting the chances of several Federal Reserve interest rate hikes in 2022.
In late morning trading, the
Dow Jones Industrial Average
was up 13 points, or less than 0.1%, with the
rising 0.3% and the
declining 0.1%. The indexes lost some steam after the market’s open. Trading was mixed across the stock market, with just more than half of the S&P 500’s components rising.
The consumer-price index rose 0.8% month-over-month in November, beating economists’ estimates of 0.7%. Year-over-year, prices rose 6.8%, the fastest annual increase since 1982. Investors had wanted to see a moderation in inflation, which would make the Fed less compelled to remove monetary support so rapidly.
Stocks certainly weren’t selling off. “Many have felt the effects of inflation in their day-to-day, so this likely isn’t a huge shocker to the market,” wrote Mike Loewengart, managing director of investment strategy at ETrade.
The Fed—and the market—have made note of higher inflation. The central bank indicated that it will increase the speed at which it is ending its bond-buying program, opening the door potential short-term interest rate increases in 2022.
Markets have been quick to reflect the chances that an abrupt change in monetary policy could dent economic growth. Short-term Treasury note rates have risen, while long-dated bond yields, which often forecast longer-term economic demand and inflation have fallen. The S&P 500 and Dow are both still trading below their all-time highs hit in November.
“The stock market will continue to rise as consumer spending remains strong and corporate profits—for now—are continuing to grow,” wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
Indeed, households are able to pay the higher prices for the near-term, as they still hold trillions of dollars of excess cash compared with just before the pandemic. That’s part of a picture that shows aggregate earnings per share on the S&P 500 growing 9% in 2022 and 10% in 2023, according to FactSet. All of those dynamics can often keep investors interested in buying stocks.
It’s still important to note, though, that the stock market has been showing weakness recently. Not only are the S&P 500 and Dow still trading below their highs, but many individual stocks are losing steam. As of early this week, the majority of New York Stock Exchange-listed stocks were trading below their 200-day moving averages, signifying that investors are losing confidence that the stocks can maintain such strong upward momentum.
Going forward, “increased volatility is likely over the next 6-12 months as inflation, interest rates and Fed policy are all going to be shifting much more…
Read More News: Stocks Are Little Changed as Markets Digest Inflation Data