Here’s Why Stocks Are Rallying Despite Another Dire Inflation Report

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The stock market moved up slightly on Wednesday even after consumer prices jumped again last month – with inflation at nearly 40-year highs, a good deal of uncertainty has already suggested the price is in the market as investors seemed off the bad news.

important facts

The Dow Jones Industrial Average rose 0.1%, while the S&P 500 rose 0.2% and the tech-heavy Nasdaq Composite gained 0.4%.

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Market gains on Wednesday came despite a 7% year-on-year increase in consumer prices last month, the biggest annual increase since June 1982. statistics Issued by the Department of Labor.

While overall prices rose 0.5% since November – which was largely in line with what economists were expecting, not to mention a small drop from the previous month’s 0.8% increase.

Helping stocks stay strong despite grim inflation data on Wednesday were comments from a day earlier by Federal Reserve Chairman Jerome Powell, who said tighter monetary policy was needed to control rising prices.

The Fed now plans to end its monthly asset purchases by March, then begin raising interest rates shortly thereafter – three rate hikes forecast for 2022, though some experts predict more.

Shares of tech stocks, which have faced heavy sell-off so far in the new year, rose nearly 1.5% on Wednesday, with Microsoft and Google-parent Alphabet up.

Important Quote:

Wednesday’s consumer price index reading, like Powell’s testimony before the Senate on Tuesday, “could have been worse,” says Adam Crisafuli, founder of Vital Knowledge. A slight increase in consumer prices since last month is in line with expectations – and given the current environment, that counts as “better than intimidated”. While the numbers are “by no means good,” inflation is still running hot, they do not fundamentally change the outlook or expectations of the Federal Reserve.

Main background:

The stock market erased earlier losses and rallied higher after Powell’s testimony before the Senate on Tuesday. The Fed chairman promised that the central bank would not hesitate to raise interest rates higher than expected if high inflation persists. “If we have to raise interest rates further over time, we will,” Powell said. “We’ll Use Our Tools to Get Back Inflation” [to long-term targets],

What to look for:

Will it hold? “Markets are giving the Fed the benefit of the doubt – so far – but there are mounting risks that inflation will force the Fed into a rate-hike cycle resulting in a stock market shock, similar to what happened in 2018. Independent Advisor “In this case, inflation is a concern, whereas it was not in 2018, and it could be a significant difference between now and 4 years ago,” says Chris Zacarelli, Coalition’s chief investment officer.

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Inflation rises further to 7% in December – Markets rattle at new 39-year high as Fed’s price concernsBusinesshala,

Stocks surge after Powell says the Fed isn’t afraid to raise rates further if high inflation persists.Businesshala,

After Fed Minutes Show, Stocks Can Fall Central Bank And Remove Stimulus (Businesshala,

Gas and meat prices finally fall – but cars, housing, medical care and more still fuel inflation growth (Businesshala,

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