Stocks close at a record as investors look beyond hot inflation

Stocks ended Friday at a record level as investors shrugged off a key inflation report ahead of the Federal Reserve’s final policy-setting meeting of the year next week. 

The S&P 500 jumped nearly 1% to log a record closing high. The Dow gained more than 200 points, or 0.6%, while the Nasdaq added 0.7%. 

The Labor Department’s Consumer Price Index (CPI) showed yet another multi-decade high rate of inflation for November. The CPI climbed by 6.8% in November compared to last year, marking the fastest annual increase since June 1982. This rate matched consensus economists’ estimates, according to Bloomberg data, but accelerated compared to the 6.2% year-over-year rate from the prior month. And even excluding more volatile food and energy prices, the so-called core CPI rose by 4.9% over last year for the fastest increase in about three decades. 

“What we’re looking for is a deceleration as we go forward over the course of 2022,” Luke Tilley, Wilmington Trust chief economist, told Yahoo Finance Live on Thursday, ahead of the CPI print.

“That doesn’t mean prices are going to go down, it’s just a question of, are they going to go up as much in 2022 as in 2021 without the kind of fiscal stimulus we’ve had this year? And we don’t think that that’s going to happen, because it won’t be as much of a push on the demand side,” he added. “And then on the supply side, we’re looking for the labor market to improve, more people returning to work, and of course the delivery and the ports to improve.”  

Other recent data have further underscored the present tightness on the supply side of the economy. Weekly U.S. jobless claims plunged more than expected to reach the lowest level since 1969 last week, coming in even below pre-pandemic levels. And U.S. job openings came in at more than 11 million for only the second time on record in October.  

“Wage increases are probably on the agenda for next year. That’s part of the broadening of inflationary pressures that we’ve already started to see come through in some of that CPI data,” Seema Shah, Principal Global Investors chief strategist, told Yahoo Finance Live on Thursday. “But I have to say that we’re not so worried because we’re starting to see other parts of the inflation picture actually starting to fade. So at the end of next year, 12 months from now, we’re not expecting the kind of 6-7% CPI numbers … We’re thinking more the 3% level for 12 months time.” 

Given the backdrop of elevated inflation, Federal Reserve officials have adopted more hawkish rhetoric about the monetary policy path forward. Some pundits suggested more rotation could occur in U.S. equity markets beneath the surface as investors price in expectations for tighter Fed policy to rein in inflation. The Federal Open Market Committee is slated to hold its final two-day monetary policy-setting meeting of the year next week. 

“The inflation print from this morning will reinforce the Fed’s resolve to accelerate tapering. With the strength in the economic recovery, it is time to take the crutches away,” Anu Gaggar, global investment strategist for Commonwealth Financial Network, wrote in an email on Friday. “Supply and labor shortages will keep aggregate prices elevated for longer, keeping inflation higher than the Fed target for a while. Omicron might dent the nascent recovery in demand for services such as leisure and hospitality while widening the demand-supply imbalance for goods.”

4:00 p.m. ET: S&P 500 surges 3.8% in week

Here were the main moves in markets as of 4:00 p.m. ET:

  • S&P 500 (^GSPC): +44.60 (+0.96%) to 4,712.05

  • Dow (^DJI): +217.29 (+0.61%) to 35,971.98

  • Nasdaq (^IXIC): +113.23 (+0.73%) to 15,630.60

  • Crude (CL=F): +$1.04 (+1.47%) to $71.98 a barrel

  • Gold (GC=F): +$6.30 (+0.35%) to $1,783.00 per ounce

  • 10-year Treasury (^TNX): +0.2 bps to yield 1.4890%

2:42 p.m. ET: Ford shares jump to the highest in two decades after founder’s grandson spends $20 million in share purchases

Shares of automaker Ford (F) jumped Friday afternoon to reach their highest level since 2001. 

The move came amid news that Ford’s executive chairman Bill Ford, great-grandson of Ford founder Henry Ford, chose to exercise nearly 2 million of stock options at a total cost of $20.5 million as part of his executive compensation. 

10:12 a.m. ET: Consumer sentiment improved more than expected in early December: University of Michigan

The University of Michigan’s December Surveys of Consumers saw a bigger-than-expected recovery after reaching a decade-low in November, even as respondents called out rising inflation.

The institution’s headline sentiment index rose to 70.4 in its preliminary December survey compared to the 68.0 consensus economists were expecting, according to Bloomberg consensus data. This came following November’s print of 67.4 — the lowest in about 10 years.

Consumers’ one-year inflation expectations steadied at 4.9%, matching November’s rate. For the next five to 10 years, consumers expected inflation to rise at a 3.0% clip, with this also matching November’s reading.

“Sentiment posted a small overall gain in early December (+4.5%), although it was still nearly identical to the average reading in the prior four months (70.6),” Richard Curtin, chief economist for the Surveys of Consumers, wrote in a press statement. “The more interesting result was the large disparity between monthly gain among households with incomes in the lowest third (+23.6%) of the income distribution compared with the modest losses among households in the middle (-3.8%) and top third (-4.3%).”

“The core of the renewed optimism among the bottom third was the expectation of income increases of 2.9% during the year ahead; the last time a higher gain for this group was expected was in 1981,” he added. “This suggests an emerging wage-price spiral that could propel inflation higher in the years ahead.”

He also noted that 76% of consumers selected “inflation” as “the most serious problem facing the nation,” when asked directly to select between inflation and unemployment. Just 21% selected unemployment, Curtin added. 

9:30 a.m. ET: Stocks open higher after hot inflation print

Here’s where markets were trading just after the opening bell:

  • S&P 500 (^GSPC): +30.78 (+0.66%) to 4,698.23

  • Dow (^DJI): +171.58 (+0.48%) to 35,886.82

  • Nasdaq (^IXIC): +113.45 (+0.73%) to 15,631.82

  • Crude (CL=F): +$0.85 (+1.20%) to $71.79 a barrel

  • Gold (GC=F): +$6.40 (+0.36%) to $1,783.10 per ounce

  • 10-year Treasury (^TNX): -1.7 bps to yield 1.47%

8:36 a.m. ET: CPI inflation posts biggest year-over-year increase since 1982

The Labor Department’s Consumer Price Index showed the largest annual increase in inflation since 1982, signaling persistently elevated price pressures in the U.S. economy. 

The broadest measure of CPI grew at a 6.8% year-over-year rate in November, or the fastest rise in nearly four decades. This accelerated from the prior month’s 6.2% annual rise. On a month-over-month basis, the CPI rose 0.8%, coming in hotter than the 0.7% monthly rate consensus economists were expecting.

7:20 a.m. ET Friday: Stock futures extend gains ahead of CPI report

Here’s where markets were trading ahead of the opening bell:

  • S&P 500 futures (ES=F): +16.75 points (+0.36%), to 4,683.75

  • Dow futures (YM=F): +93 points (+0.26%), to 35,846.00

  • Nasdaq futures (NQ=F): +57.25 points (+0.35%) to 16,206.00

  • Crude (CL=F): +$0.66 (+0.93%) to $71.60 a barrel

  • Gold (GC=F): -$3.50 (-0.2%) to $1,773.20 per ounce

  • 10-year Treasury (^TNX): +2.9 bps to yield 1.516%

6:25 p.m. ET Thursday: Stock futures open higher 

Here were the main moves in markets in late trading on Thursday:

  • S&P 500 futures (ES=F): +6.5 points (+0.14%), to 4,673.50

  • Dow futures (YM=F): +34 points (+0.1%), to 35,787.00

  • Nasdaq futures (NQ=F): +25.25 points (+0.16%) to 16,174.00

NEW YORK, NEW YORK – DECEMBER 08: Traders work on the floor of the New York Stock Exchange (NYSE) on December 08, 2021 in New York City. Following news from the pharmaceutical company Pfizer on the effectiveness of its vaccine against the Omicron COVID-19 variant, the Dow Jones Industrial Average rallied nearly 100 points in morning trading on Wednesday. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

Christopher Lewis

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