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S&P 500 Takes Red-Hot Inflation in Stride as Materials, Tech Shine

Stock MarketsJan 12, 2022 04:05PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 closed higher Wednesday, as data showing inflation hitting the fastest pace in decades, which was largely expected, failed to spook investors.

S&P 500 rose 0.3%, the Dow Jones Industrial Average gained 0.1%, or 39 points, the Nasdaq added 0.2%.

The consumer price index rose 0.6% in December, just above expectations for a 0.5% increase, taking the year-on-year consumer prices through December to 7%, in-line with expectations and the fastest rate since 1982.

A deeper look into the report, however, showed sticker areas of price pressures, particularly from the services sector, rose by less than expected, stoking early hopes that inflation may cool in the months ahead.

“[C]ore services rose by just 0.3%, the slowest since September. Housing inflation did not accelerate as we expected, and price increases slowed in travel categories,” {0|{Jefferies said in a note}}.  

But even if price pressures ease in “three months, or six months from now that’s not going to move the dial in time for the Fed to start making changes to how they're thinking about tapering or rate hikes,” Johan Grahn, head of ETF Strategy at Allianz (DE:ALVG) told Investing.com in an interview on Wednesday.

Following the inflation report, Treasury yields continued to slip, with the 10-year backing further away from 1.8%, paving the way for an ongoing recovery in tech.

Big tech was mostly higher, led by Alphabet (NASDAQ:GOOGL), though Meta Platforms (NASDAQ:FB) was the exception, down about 0.3%.              

Tesla (NASDAQ:TSLA), meanwhile, jumped about 4% a day after receiving a price upgrade from Morgan Stanley to $1,300 per share from $1,200.

A fall in health care kept a lid on gains in the broader market following a more than 7% slump in Biogen (NASDAQ:BIIB) after Medicare said it planned to only cover the company’s Alzheimer's drug, Aduhelm, for patients enrolled in approved clinical trials.

PayPal (NASDAQ:PYPL), meanwhile, slipped 2% after {{0|Jefferies downgraded the company to a hold from buy and cut its price target on the stock  to $200 From $255, citing a cautious fundamental backdrop in 2022.

Energy was flat even as oil prices neared two-month highs following a larger-than-expected draw in weekly crude inventories. Energy prices will likely "continue to surge- as demand from economic reopening and reflation collides with a cold snap and tight supply in the Northeast region," Janney Montgomery Scott said in a note. "We remain bullish on crude oil prices- and expect targets toward the $85-90 range in 2022."

S&P 500 Takes Red-Hot Inflation in Stride as Materials, Tech Shine
 

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Comments (16)
Sam Gates
Sam Gates Jan 12, 2022 8:27PM ET
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Nasdaq will drop 10-20% next few weeks
Samuel Klein
Samuel Klein Jan 12, 2022 8:27PM ET
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ok, short it with everything you have
Samuel Klein
Samuel Klein Jan 12, 2022 8:27PM ET
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thumbs down for what, telling him to act on his massive knowledge? lol
Samuel Klein
Samuel Klein Jan 12, 2022 8:27PM ET
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nasdaq down to 12 to 13k in 2 weeks? crack heads who believe this deserve to lose all their money. good luck
Peter ONeill
Peter ONeill Jan 12, 2022 8:27PM ET
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It won't - it should do - but the money supply pumped in by fed printing presses is too high and all this money needs to find a home somewhere (any dip for 18 months has been almost immediately jumped into and bought by funds regardless of risk/reward). The Fed reserve with low-interest rates has also manipulated the market so there is nowhere else to invest money but property, speculative assets such as NFT or cryptocurrency - with bond yields being so low & inflation so high. The bubble will continue growing on this debt-fuelled binge until it bursts and falls even harder and faster.  My own personal prediction is the market will largely float sideway this year with maybe a 9%-11% annual increase by the end of 2022 - before falling by around 40% in Q2 or Q3 2023 once the new reality and global debt hangover / higher taxes to pay for sets in.... Unless another major black swan event occurs before then...
Chris Hall
Chris Hall Jan 12, 2022 8:09PM ET
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We lost our way and allowed greed and excess to become the twin pillars of too much of the financial culture. We became a society utterly absorbed in consumption and dismissive of moderation.
Mesi King
Mesi King Jan 12, 2022 7:47PM ET
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Invest no matter what
New Jazenevd
New Jazenevd Jan 12, 2022 7:33PM ET
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High inflation is good for stocks and bad for economy. That’s it. No good reasons to make hysterics about this. Better get invested at last.
Peter ONeill
Peter ONeill Jan 12, 2022 7:33PM ET
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High inflation = bad for economy/people's standard of living = central banks WILL be forced to increase interest rates to lower. Higher interest rates burn into highly indebted companies and currency exchange rates (so companies who make a large % of revenue abroad will be more impacted). High inflation also means people are more inclined to ask for a wage increase which lowers profit margins / they will buy food or gas instead of that brand new tv or holiday abroad which lowers consumption on unnecessary luxuries.
Stan Smith
Stan Smith Jan 12, 2022 7:22PM ET
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"Red Hot inflation"...isn't that a false positive?
Luis Bustamante
Luis Bustamante Jan 12, 2022 7:19PM ET
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I believe this is the craziest moment in the US Stock Market history and the country in general terms.It is just hard to maintain composure reading or listening to finantial news and institutions. This time they are playing with fire, they are playing with citizens welfare whose incomes are shrinking as inflation advance mercilessly. A serious central bank would have never allowed inflation to run this high to the detriment of main street and openly favoring the rich. Your time have come Mr. Powel to do what is correct. Act in behalf of your country for God sake.
Stan Smith
Stan Smith Jan 12, 2022 7:19PM ET
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Wall St 100, Main St 0
JAMES CUNHA
JAMES CUNHA Jan 12, 2022 6:27PM ET
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it's called moral hazard. The Fed's prolonged QE created the perfect storm in our markets. Too many investors believe that the Fed will bail out the markets.
JAMES CUNHA
JAMES CUNHA Jan 12, 2022 6:27PM ET
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as I have previously witnessed... investors are about to receive a very painful lesson.
Samuel Klein
Samuel Klein Jan 12, 2022 6:27PM ET
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there is a difference between fomo investors who should have a managed account and actual investors
Bear Bak
Bear Bak Jan 12, 2022 6:26PM ET
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yet retailers are down and losing paytience!
New Jazenevd
New Jazenevd Jan 12, 2022 6:01PM ET
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Rising inflation is good for stocks, especially, in materials sector. Every experienced investor is supposed to know this. When inflation gets to double digits, even habitually ignorant mainstream media “financial news” will admit this old investment knowledge.
El Broker
El Broker Jan 12, 2022 5:58PM ET
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they will soon learn pain
Adam Paine
Adam Paine Jan 12, 2022 5:33PM ET
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consumers are not taking this "in stride" Warning signs point to all time high credit card debt. the notion that the majority of America can withstand stagnation will soon rear its ugly head. 😒
Casador Del Oso
Casador Del Oso Jan 12, 2022 5:24PM ET
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Watch tomorrow as suddenly the market is gripped by inflation fears. When the VIX hits the 50-60 range I will consider buying back SPY.
Al Ose
Al Ose Jan 12, 2022 5:24PM ET
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Weird post
Scott Keever
Scott Keever Jan 12, 2022 5:19PM ET
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Hey guys keep pumping the stock market I will cash out my 401K and not return to the workforce thanks
Al Ose
Al Ose Jan 12, 2022 5:19PM ET
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See ya
Mitchel Pioneer
Mitchel Pioneer Jan 12, 2022 4:39PM ET
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The greatest financial fraud in history, and biggest investment joke in the world just had to close in the green.  Day 3 of the most flagrant string of manipulation in years.
VietAnh Tran
VietAnh Tran Jan 12, 2022 4:39PM ET
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I understand why you are in the 99% group.
Mario tragik
Mario tragik Jan 12, 2022 4:36PM ET
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US markets, the only ponzi scam that is legal.
VietAnh Tran
VietAnh Tran Jan 12, 2022 4:36PM ET
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And those who missed it usually complained.
Samuel Klein
Samuel Klein Jan 12, 2022 4:36PM ET
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same people who despise those who are wealthy
Peter ONeill
Peter ONeill Jan 12, 2022 4:36PM ET
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VietAnh Tran  I am invested but likewise like most  - I can EASILY tell the market is in an artificial bubble built by Fed printing presses/interest rates. Will I sell the shares I have? No...but likewise ZERO chance will I buy anymore until the market corrects itself by about 30% from current levels to meet more natural and sustainable trajectory levels.
Steffen vdm
Steffen vdm Jan 12, 2022 4:26PM ET
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"may cool in the months ahead". may = may not, cool = go down a little, months ahead = next 6/12 months.
Peter ONeill
Peter ONeill Jan 12, 2022 4:26PM ET
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A lot of annual wage/performance reviews have not happened yet - where a lot will be demanding higher wages to meet higher inflation = circular inflation. Also, the Dec Inflation figures were 0.4% lower as oil and gas prices fell in late Nov due to global Covid concerns. Oil has since recovered to $85 a barrel and if it stays at this level can see Jan & Feb CPI figures climb even higher.
 
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