S&P 500 ends at record high as US stock indices book weekly gains after highest CPI in nearly 40 years

The Dow gained 4% this week, the S&P 500 climbed 3.8% and the Nasdaq rose 3.6%. The Dow saw its largest weekly percentage gain since March, posting a four-week loss streak, according to Dow Jones Market Data. The S&P 500 and Nasdaq each had their biggest weekly percentage gains since February.

What drove the markets?

US stocks closed higher Friday as investors interpreted the latest consumer inflation data as not as bad as the worst-case scenario for Wall Street.

Data released ahead of Wall Street opening showed consumer price inflation rose 6.8% a year in November, slightly ahead of expectations for a 6.7% rise in a poll of economists by The Wall Street Journal. It marks the highest annual inflation rate since 1982.

“If you look at the number on the surface, it certainly looks like it came in hot,” Jack Janasiewicz, chief portfolio strategist at Natixis Investment Managers Solutions, said in a phone interview on Friday. While inflationary pressures were “slightly above” economists’ forecasts, the “whisper” passed through markets yesterday, at a much stronger level, he said.

Also President Joe Biden’s statement Thursday Friday’s report on consumer prices would not reflect a decline in energy prices, Janasiewicz said, as the data was collected and helped build expectations for a stronger inflation reading. Some investors may have interpreted Biden’s comments as an attempt to “soften the blow” of a potentially higher-than-expected imprint of the consumer price index, he said.

The cost of living was up 0.8% for the month, just above expectations for a gain of 0.7%. Core inflation, excluding food and energy costs, rose as expected by 0.5% in November, while core inflation rose 4.9% year-on-year in November.

Read: Highest US inflation in nearly 40 years brings a sigh of relief to some corners of financial markets

“The initial reaction was that the US dollar fell and stocks rose, with high-growth technology stocks leading the way; moves in line with the easing of aggressive Fed expectations,” Fiona Cincotta, senior financial markets analyst at City Index, said in a market briefing.

Consumer Goods SP500EW.30,
+1.47%
and information technology SP500EW.45,
+1.24%
Friday saw the strongest gains in the sectors of the S&P 500 index, each closing about 2% higher, according to data from FactSet.

Friday’s consumer inflation report sets the stage for the Federal Reserve’s policy meeting next week after Fed Chair Jerome Powell recently telegraphed the central bank’s plans to consider phasing out its monthly bond purchases at a faster pace.

“On the policy front, this report increases the likelihood that the Fed will announce an accelerated winding-down at its December meeting, which markets are already expecting,” Alex Pelle, US economist at Mizuho, ​​wrote in a note Friday.

“At the current rate of inflation, the economy would be at an average of 2% inflation over two business cycles (since the Great Financial Crisis) by next year,” wrote Pelle. “As such, we expect the December dot plot to show at least 2 increases at the median in 2022, with the risk of showing 3 increases at the median for 2022,” the economist wrote, referring to the chart. of the interest rate projections of members of the Federal Open Market Committee.

The Fed will meet December 14-15.

Meanwhile, consumer confidence has been measured by the University of Michigan gauge bounced back to 70.4 in December from a final reading in November of 67.4. Economists polled by The Wall Street Journal expected an index reading of 68.0.

“We still see it relatively muted compared to pre-pandemic levels,” Michael Reynolds, vice president of investment strategy at Glenmede, said in a phone interview on Friday. That suggests that consumers are “just not as confident as they may have been before this environment.”

Read: Consumer confidence recovers in December, but fears of a ‘spiral’ in inflation loom, UMich survey finds

Which companies were central?

• Shares of Oracle Corp.
  ORCL,
  +15.61%
  rose 15.6% after the database giant reported forecasted results for its fiscal second quarter.

• broadcom
  GDPR,
  +8.27%
  shares rose 8.3% after the chip and software company announced an aggressive plan to return shareholder money after a profit drop.

• tough
  ALL OF THEM,
  -8.06%
  Inventory fell about 8.1% after the online retailer of pet food and other pet-related products reported fiscal third quarter results late Thursday.

• platoon Interactive Inc.
  PTON,
  -5.38%
  shares fell 5.4% after the home workout equipment maker was moved back to neutral from outperform at Credit Suisse, which lowered its price target from $112 to $50. Shares fell 11% Thursday amid publicity about a plot twist in the ‘Sex and the City’ revival.

How did other assets fare?

• The return on the 10-year Treasury TMUBMUSD10Y,
  1.485%
  had changed little on Friday at 1.487%, but rose about 14.5 basis points for the week, according to Dow Jones Market Data. Treasury yields and prices move in opposite directions.

• The ICE US Dollar Index DXY,
  -0.23%,
  a measure of the currency against half a dozen other monetary units, fell 0.2% Friday and fell about 0.1% this week.

• In oil futures, West Texas Intermediate crude CL00,
  +0.40%
  for January delivery CLFFX,
  +0.51%
  rose 1% to settle at $71.67 a barrel, the strongest weekly gain since August.

• gold futures GC00,
  -0.10%
  for February delivery GCG22,
  -0.10%
  rose 0.5% to $1,784.80 an ounce, slightly above the end of the most active contract a week ago, FactSet data shows.

• The Stoxx Europe 600 Index SXXP,
  -0.30%
  Friday closed 0.3% lower but ended the week 2.8% higher as London’s FTSE 100 Index UKX,
  -0.40%
  fell 0.4%, but started a weekly advance of 2.4%.

• In Asia, the Shanghai Composite Index SHCOMP,
  -0.18%
  closed 0.2% lower but posted a weekly gain of 1.6% as the Hang Seng Index HSI,
  -1.07%
  fell about 1.1% in Hong Kong but continued to rise 1% over the week. China’s CSI 300 000300,
  -0.46%
  fell 0.5% but boasted a weekly rally of 3.1%. Japanese Nikkei 225 Index NIK,
  -1.00%
  closed 1% but made a 1.5% gain over the five-day period.

—Barbara Kollmeyer contributed to this article.