US stocks rise as inflation reading comes in hot but in line with estimates

Stock market Dow Jones trader New York

US stocks rose on Wednesday after inflation data for December showed prices rising at the quickest pace in almost four decades. 

The Consumer Price Index gained 7% year-over-year last month, the Bureau of Labor Statistics announced, in line with the median forecast of 7% given by the economists surveyed by Bloomberg. The pace reflects the strongest inflation since 1982 and marks a slight acceleration from the 6.8% year-over-year leap seen in November.

The report reveals inflation worsened slightly through December 2021 as the Omicron variant spread across the country alongside continued supply chain constraints. 

Here’s where US indexes stood at the 9:30 a.m. ET open on Wednesday:

“Wednesday’s CPI report doesn’t change anything for the Federal Reserve’s policy plans and it has already told the markets that it expects a tight labor market, rising wages, and low unemployment to continue,” George Ball, chairman of Sanders Morris Harris, an investment firm, said in a note.

All indexes edged higher, as investors shook off the inflation reading that indicated the Fed was likely to continue tightening monetary policy and is on track to begin hiking interest rates in March. 

Others though said the CPI reading could actually alter the Fed’s plans.

“The Fed is going to be forced to begin raising rates in March and depending on the political pressure on them – from both sides of the aisle – they are going to have to raise rates four or more times in this year and potentially more than that next year,” said Chris Zaccarelli, CIO at Independent Advisor Alliance. “The market is giving the Fed the benefit of the doubt – so far – but risks are rising that inflation will force the Fed into a rate-hiking cycle that results in a shock to the stock market.”

The 10-year Treasury note yield slipped to 1.713% from Tuesday’s 1.745% rate. The yield saw a brief spike to about 1.80% in the previous session — the highest level since before the COVID-19 pandemic. Bond yields and prices move in opposite directions.

Oil prices ticked up. West Texas Intermediate crude oil rose 0.87% to $81.93 per barrel. Brent crude, oil’s international benchmark, jumped 0.56% to $84.21 per barrel.

The crude oil inventories number will be out at 10:30 a.m. ET Wednesday.

Gold rose 0.07% to $1,819.52 per ounce.