4:05pm: CPI for December comes in hotter than expected
US stocks ended the day mixed in a see-saw session after December’s consumer price index (CPI) was 3.4% year over year, higher than the 3.2% expected by economists.
At the close, the Dow gained 15 points to 37,711, while the S&P 500 eased 3 points at 4,780 and the tech-heavy Nasdaq rose a single point to 14,970.
"This uptick in CPI is a critical reminder of the unpredictable nature of economic recovery and the murkiness of the macro-economic data," Global X chief investment officer Jon Maier said.
Notable movers included shares of Albemarle Corporation (NYSE:ALB, ETR:AMC), which fell more than 3% after Deutsche Bank analysts downgraded the chemicals manufacturer and lithium miner to ‘Hold’.
12:00pm:
Stocks took a turn for the worse after strong inflation figures dented hopes of an early cut in interest rates.
At noon, the Dow Jones Industrial Average was down 212.59 points, 0.6%, at 37,483.14, the S&P 500 was down 34.43 points, 0.7%, at 4,749.02 and the Nasdaq Composite was down 129.00 points, 0.9%, at 14,840.65.
Craig Erlam at Oanda said: "We're seeing some more risk aversion in the markets on Thursday as inflation data from the US failed to deliver in the way investors hoped."
"The CPI report has become a source of good news for investors, as inflation has fallen sharply to within touching distance of the Federal Reserve's 2% target."
"The last step may be the hardest, as many have warned, but investors are clearly of the view that the hard work has been done and it's only a matter of time until rates are falling."
9:45am: Stocks shrug aside strong inflation print to push higher
Stocks opened higher on Thursday shrugging aside stronger-than-expected inflation figures.
Shortly after the opening bell, the Dow Jones Industrial Average was up 41.39, 0.1%, at 37,737.12, the S&P 500 was up 10.92 points, 0.2%, at 4,794.37 and the Nasdaq Composite was up 65.03 points, 0.4%, at 15,034.68.
Annual consumer price inflation rate picked up at a faster pace than expected, seemingly pouring some cold water on the more optimistic hopes of an early rate cut.
According to the Bureau of Labor Statistics, the nation's yearly inflation rate picked up to 3.4% in December, from 3.1% in November. The reading was hotter than expected. According to FXStreet cited consensus, the annual inflation rate was forecast to only slightly heat up to 3.2%.
Annual core inflation also came in above forecast at 3.9%, against expectations of 3.8%, according to FXStreet. The measure, which excludes food and energy, eased from 4.0% in November.
On a monthly basis, consumer prices were 0.3% higher in December from November. They had risen 0.1% in November from October.
deVere Group’s Nigel Green said: “We believe that there’s still not enough evidence for the central bank to start cutting rates."
But others still felt a March rate cut was possible.
Paul Ashworth at Capital Economics: "Core prices only increased by 0.3% because of a 0.5% m/m increase in used vehicle prices, which we know from the more timely auction data will be more than reversed soon, and a bigger 0.5% m/m increase in shelter inflation, which we know isn’t going to last based on the marked slowdown in the more timely measures of newly-signed rental agreements."
"What ultimately matters is the Fed’s preferred PCE measure of inflation," he said, where he expects to see a 0.2% month on month increase in December.
"In short, we don’t think December’s CPI data necessarily rules out a March rate cut by the Fed," he said.
7:00am: Stock futures point higher with CPI to come
Stock futures are pointing to a positive start but that could all change depending on today’s inflation reading.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were up 0.1% and contracts for the Nasdaq 100 futures rose 0.4%.
Julien Lafargue, chief market strategist at Barclays Private Bank, said: “US headline inflation is expected to have picked up slightly in December on the back of base effects related to energy prices. At the core level in our view, prices increases should remain on a downtrend helped by continued goods deflation.”
“The key question mark is what will happen to housing-related costs. These have yet to significantly moderate. Although we would expect this to happen over the course of 2024, lag effects and the prospects of lower interest rates ahead could slow down the normalisation process.”
“In the end, in our view markets remain too aggressive around interest rate cuts expectations. While an upside surprise to the December CPI may not be enough to change this perception it could be a first step in allowing markets to align with the Fed’s narrative that cuts will come but not just yet.”
In other economic data, new applications for US state unemployment aid, a proxy for lay-offs, are forecast to have ticked up to 210,000 last week, from 202,000 in the prior seven-day period.