On Friday, records were broken in the markets’ close as investors ignored a crucial inflation data released before this year's Federal Reserve's final policy meeting.
The S&P 500 gained about 1% to set a new trade-closing level. The Dow rose about 200 points, or 0.6%, while the Nasdaq increased by 0.7%.
The Consumer Price Index (CPI) from the Labor Department indicated another increased inflation rate in several decades for November. The CPI increased by 6.8% in November over the previous year, the largest yearly growth since June 1982. As Bloomberg reported, the figure was in line with experts' forecasts but jumped from the previous month's 6.2% annualized rate. Even when volatile goods costs are excluded, the core CPI increased by 4.9% from a year earlier, the fastest growth in 30 years.
"We expect a slowdown in growth as we move forward in 2022," said Luke Tilley, Wilmington Trust chief economist, before the CPI report.
He also stated that this situation doesn't indicate prices will fall; it's just a matter of whether they will rise as much in 2022 as they did in 2021 without the stimulus measures that have been seen this year. Also, analysts don't expect that to actually occur as there won't be as much pressure on the demand side. "From a supply perspective, we're hoping for a better labor market, more people coming back to offices, and for a better transportation and port situation."
Other recent indicators have highlighted the current supply shortage in the economy. Last week, weekly unemployment claims in the United States fell more than predicted to their lowest point since 1969, falling even lower than pre-covid levels. In October, the number of job vacancies in the United States exceeded 11 million - only the second time on record.
Next year, there is almost certainly a question of increasing wages. Wage rises are almost certainly on the horizon for the coming year. A widening inflationary pressure has already been showing up in some of the CPI statistics. "I have to admit that we're not as concerned since other aspects of the inflation image are beginning to recede. So we're not anticipating 6-7% CPI figures by the end of 2022. For the next 12 months, we're expecting around the 3% mark," Seema Shah from Principal Global Investors said.
Amid heightened inflation, Federal Reserve policymakers have used more aggressive statements regarding future fiscal policy. Experts believe that US stocks could continue to rotate under the surface as investors gauge forecasts for stricter Fed actions to curb inflation. Next week, the Federal Open Market Committee will conduct its final meeting this year to decide fiscal policy.
Anu Gaggar from Commonwealth Financial Network stated on Friday that the inflation information released that day would strengthen the Fed's belief that it needs to speed up rate cuts. With the recovery taking hold, now is the time to pull up the crutches and start walking again. Inflation will remain above the Fed's objective for some time due to the lack of supply and labor. There is a risk that a new Coronavirus strain will hinder the forming rebound in demand for entertainment and tourism while increasing the gap between supply and demand.
4:00 p.m. ET: The S&P 500 is up 3.8% for the week.
2:42 p.m. ET: Ford shares hit a two-decade high after the company's founder's grandson spent $20 million on stock purchases.
Ford (F) stock hit a new high on Friday, reaching its maximum since 2001.
The information came after it was revealed that Bill Ford had exercised over 2 million share options for an overall price of $20.5 million as part of his management pay.
10:12 a.m. ET: According to University of Michigan researchers, consumer mood increased more than predicted in the start of December.
The December Surveys of Consumers revealed a stronger-than-expected rebound after falling to a decade low in November, despite respondents' concerns about increasing prices.
According to Bloomberg consensus statistics, the institution's headline sentiment index increased to 70.4 in its initial December poll, above the forecast of 68.0. This followed November's reading of 67.4 — the weakest in roughly ten years.
Consumers' one-year inflation forecasts have remained stable at 4.9%, mirroring the November average. Consumers projected inflation to climb at a 3.0% annual rate over five to ten years, matching November's level.
In a report, Richard Curtin, the chief economist for the Surveys of Consumers, wrote that sentiment increased somewhat (+4.5%) in early December. However, it remained almost comparable to the average level for the previous four months (70.6). The most significant finding was the substantial discrepancy in monthly gains among families with incomes in the bottom third (+23.6%) of the income distribution against the small losses among those in the center (-3.8%) and top third (-4.3%).
The forecast of 2.9% income rises in the next year was at the heart of the increased confidence among the lower third; the last time this category was predicted to have a more significant gain was in 1981. This signals the emergence of a wage-price spiral, which might drive rate rises further in the coming years.
He also pointed out that 76% of respondents chose inflation as the bigger threat confronting the country than unemployment (with only 21%).
9:30 a.m. ET: Stocks start higher on a solid inflation report.
8:36 a.m. ET: CPI inflation rises by the most since 1982.
The Labor Department's Consumer Price Index recorded the highest yearly rise in inflation since 1982, indicating continuously high price pressures in the US economy.
The largest gauge of CPI increased at a 6.8% year-over-year rate in November, the most considerable increase in almost 40 years. This was an acceleration from the previous month's 6.2% annual increase. The CPI grew 0.8% month over month, above the 0.7% monthly rate consensus experts expected.
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