US close: Stocks remain positive as consumer prices rise further

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Wall Street kept their heads above water on Wednesday, as market participants digested December's consumer price index reading.

At the close, the Dow Jones Industrial Average was up 0.11% at 36,290.32, as the S&P 500 added 0.28% to 4,726.35 and the Nasdaq Composite was ahead 0.23% at 15,188.39.

The Dow closed 38.3 points higher on Wednesday, extending gains recorded in the previous session following Federal Reserve chairman Jerome Powell's Senate testimony on Tuesday.

“The sharp rise in the cost of living is one of the reasons why the US central bank has adopted a more hawkish position recently,” said Equiti Capital market analyst David Madden.

“Although it is worrying that costs are rising, at least the rate at which they are increasing seems to be cooling, after all, it was only a 0.2% rise.”

Madden also pointed to last week’s confirmation that the unemployment rate fell to 3.9% - the lowest level since the pandemic began.

“The impressive rebound in the labour market is also why the Fed is moving towards lifting rates.

“There are some concerns in the markets that rate hikes from the Fed might tip the economy into recession, which is part of the reason why stocks suffered at the start of the week.”

Powell's comments boosted sentiment early in the session, after the Fed head telling the Senate Banking Committee that he anticipates interest rate increases in 2022, along with the end of the central bank's monthly bond-buying programme in March and a reduction in asset holdings.

Those moves, he said, would likely be required to manage inflation amid the economy's recovery from the Covid-19 pandemic.

However, Wednesday's primary focus was the December reading of the Labor Department's consumer price index, with the report revealing that the cost of living in the US increased a bit more quickly than expected last month.

According to the data, the headline US consumer price index rose at a month-on-month pace of 0.5% in December, which pushed the year-on-year rate of CPI inflation from 6.8% in November to 7.0% for December.

At the core level, which excludes the contribution made by food and energy prices, CPI was 5.5% higher on the year.

Also on the macro front, the Mortgage Bankers Association's weekly mortgage applications report revealed that loan application volume rose 2% compared with the previous week as mortgage rates moved to 3.52% from 3.33%, their highest level in over 12 months.

That could lead prospective homebuyers to think that affordability windows would close faster than initially expected.

In equities, satellite television provider Dish TV was up 2.8% as it emerged it was once again in talks with its AT&T-controlled competitor DirecTV.

The two subscription broadcasters have courted each other several times previously, being batted down by federal competition regulators.

Tesla was up 3.9% despite fresh security concerns over the electric carmaker’s technology, with a hacker and self-titled ‘security specialist’ claiming to have hacked into more than 20 Tesla cars, gaining some control over the vehicles.

On the downside, financial services firm Jefferies tumbled 9.3% even after it reported fourth quarter net income of $324.9m, up 6% year-on-year.

Pfizer ended the session down just 0.1% after it released research choosing that the administration of its ‘Prevnar 20’ vaccine for bacterial pneumonia at the same time as its Covid-9 jabs and booster produced the same response as the initial dosing regime.

Dow Jones - Risers

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