U.S. stocks are rising as traders analyze inflation data

U.S. stocks are rising as traders analyze inflation data

World stock and government bond prices rose for the second day in a row on Wednesday as investors reviewed data showing U.S. inflation reached its highest level in nearly 40 years to focus on expectations that price rises will soon peak.

The S&P 500 on Wall Street rose 0.1 percent in mid-afternoon trading in New York City, while the tech-heavy Nasdaq Composite rose 0.2 percent.

U.S. stock markets, especially technology stocks, had a difficult start to the year due to concerns about the impact of high inflation and rising interest rates.

Data released Wednesday morning shows consumer prices rose 7 percent year-on-year in December. However, the news had little impact on investors who were reassured by comments from Federal Reserve President Jay Powell earlier this week.

Powell told the U.S. Senate Banking Committee on Tuesday that the central bank would tackle high inflation and predicted supply bottlenecks caused by pandemic disruptions this year would ease.

“We continue to expect a significant slowdown next year as reopening reinforcements and fiscal stimulus fade, and Covid-related supply constraints eventually ease,” TD Securities strategists wrote in a note to clients. “But for now, the data remains pretty strong.”

The yield on the reference ten-year treasury bond, which falls when prices rise, fell 0.01 percentage points to 1.73 percent.

Following Wednesday’s inflation report, traders continued to bet that the Fed would raise interest rates three or four times this year, to about 1 percent.

These calculations are implied by swap markets and are based on the generally accepted view that current high inflation rates will disappear as bottlenecks in the global supply chain caused by economic disruptions due to quarantine due to the coronavirus begin to ease. Investors cited them as support for stock markets.

Despite a turbulent start to the year, when the S&P 500 fell in five of seven sessions and the Nasdaq Composite briefly entered a correction, S&P traded just 1.7 percent below its previous high on Wednesday.

“Yes, the removal of housing is coming,” said Tim Graf, a macro strategist at State Street, speaking ahead of inflation data. “But does that make a significant difference in the financing environment for households and corporations?” We don’t think that way. “

Increased optimism in the US has accompanied similar positive trade in Europe and Asia. The European stock index Stoxx 600 rose 0.6 percent and London’s FTSE 100 rose 0.8 percent. Hong Kong’s Hang Seng index ended 2.8 percent higher, and its technology sub-index achieved the largest daily increase since October.

The dollar index, which measures the U.S. currency against a basket of similar countries, fell 0.7 percent.

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