US stocks ignore inflation to hit new record

Wall Street advanced on Friday and the S&P 500 notched an all-time closing high, as market participants digested an inflation reading that was in line with consensus, but also marked the largest annual increase in consumer prices in nearly four decades.

All three major US stock indexes advanced, with tech shares doing the heavy lifting.

The indexes all ended the session higher than last Friday’s close, and the benchmark S&P 500 posted its biggest weekly percentage advance since the week ended February 5, as waning jitters over the Omicron coronavirus variant helped fuel a broad rally early in the week.

A report from the Labour Department showed consumer prices surged last month to a 6.8 percent annual growth rate, the highest reading in more than 39 years.

“It would appear that today’s reaction would indicate the markets were discounting the (CPI) reading,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “The markets are always looking forward and perhaps today’s reading is indicative of a peak versus a sustained level.”

Persistent inflation due to ongoing supply-chain challenges suggests the US Federal Reserve could very well start tightening its accommodative monetary policy sooner than many might have hoped.

“Clearly, it’s being driven primarily by supply-chain issues,” Said Tim Ghriskey, senior portfolio strategist at Inverness Counsel in New York. “But it appears these issues could be easing, and over time we should see them moderate. And that should take the foot off the inflation accelerator.”

A Reuters poll of economists sees the central bank hiking key interest rates from near zero to 0.25-0.50 percent in the third quarter of next year, followed by another in the fourth quarter.

The Fed is expected to convene next week for its two-day monetary policy meeting, which market participants will be scrutinizing for any clues regarding those rate increases along with the pace at which it will taper its bond purchases.

The Dow Jones Industrial Average rose 0.6 percent, to 35,971, the S&P 500 gained 0.95 percent, to 4,712 and the Nasdaq Composite added 0.73 percent, to 15,631. (Reuters)
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Last updated: 2021-12-11 HKT 08:40