Friends
By almost every data point the CPI report came in as expected. Year over year inflation has come down from a high reading of 9.1% to today’s number of 6.5% (again that number was in line with expectations). Inflation is definitely moderating but is it doing so fast enough to satisfy the Federal Reserve? Today’s number likely means that the Fed continues to talk tough, but likely we are getting close to the end of rate hikes. It is likely we will have another ¼ point raise in February and maybe one more after that to move us to about 5% on the Fed Funds rate. But the big picture seems to be that we are close to the end of hikes unless inflation data really breaks trend and surprises to the upside.
Stocks moved higher on the news, but not immediately. We had already rallied a bit heading into the number so the muted response is not surprising. The bulls are just happy that market participants didn’t sell the news. For the day, the Dow Jones Industrial Average was up 216 points to close at 34,189. The S&P 500 was up 13 points to close at 3,983. The Nasdaq Composite Index was up 69 points to close at 11,001. Gold was up $21 to trade at $1,900 per ounce, while oil was up $.71 to trade at $78.12 per barrel WTI.
All in all, it has been a good start to the year for the bulls. Stocks have moved higher while inflation continues to moderate. Earnings season begins tomorrow, with reports from a few money center banks, and will really be the focus over the next few weeks. First, let’s see how the week finishes out tomorrow.
Have a nice evening everyone.
