Wednesday January 12, 2022
Moderate gains in New York
US inflation data not hurting stock market
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The sharp rise in inflation in the US is by no means causing havoc on Wall Street. On the contrary: the US indices closed slightly higher in the middle of the week. Jefferies shares fell by almost nine percent among individual values.
After the eagerly awaited US consumer prices for December, Wall Street showed modest gains midweek. At 7.0 percent, these climbed within the expected range compared to the previous year. Some relief was provided by the fact that there were no upside spikes that would have increased the pressure on the US Federal Reserve to start raising interest rates even earlier than previously expected. On a monthly basis, however, the increase was somewhat stronger than forecast. Overall, the inflation rate is at its highest level since 1982 and has exceeded the 6 percent mark for the third month in a row.
the Dow-Jones-Index gained 0.1 percent up 36,290 points. The S&P 500 was up 0.3 percent. The Nasdaq Composite rose 0.2 percent. On the Nyse there were 1,875 (Tuesday: 2,461) price winners and 1,484 (892) losers. 120 (141) titles closed unchanged.
“All in all, it’s as bad as we expected. We expect the Fed to start raising rates in March, with a total of four 25 basis point hikes this year and four more in 2023.” said Paul Ashworth, chief US economist at Capital Economics. Federal Reserve Bank of Cleveland President Loretta Mester sees the Federal Reserve on track to raise its short-term interest rate target at its March meeting. Mester reiterated that she expects the Fed to hike rates three times in 2022.
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The Federal Reserve will need to be more aggressive in raising interest rates this year to stem rising inflation, according to James Bullard, President of the Federal Reserve Bank of St. Louis. While he recently believed the Fed would need to raise rates three times this year, “I now think we should do maybe four hikes in 2022.”
According to a survey by the US Federal Reserve, the US economy grew moderately in the last few weeks of last year. However, growth continued to be limited by supply chain disruptions and labor market shortages in many districts, according to the Beige Book economic report. The rapid spread of the omicron variant also dampened growth.
Dollar extends levies after US data
According to the inflation data, the Dollar his taxes clearly. The dollar index fell 0.7 percent, with the euro climbing to $1.1449 from $1.1365 before the release. The dollar is struggling to continue gaining as interest rate hike expectations in the US are largely priced in, according to Credit Suisse. Yields on the bond market did not paint a uniform picture. The 10-year yield fell 0.5 basis points to 1.73 percent. The inflation data had not changed the current expectations of an end to asset purchases in March and then subsequent rate hikes, it said.
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the oil prices increased by up to 1.8 percent. Traders pointed to the weekly US oil inventory data, which fell to its lowest level since 2018. On the other hand, gasoline and diesel inventories saw a significant increase due to the negative Omicron impact. Investors appeared to take the drop with equanimity as they believed the Omicron troubles were nearing an end and could lead to a sharp rise in demand, it said.
the gold price bounced back, further establishing itself above the $1,800 mark. “The key takeaway is that gold is a spaceship and inflation is its fuel,” said Peter Spina of GoldSeek.com. “Now that inflation is proving to be firmly entrenched in the system and awareness of inflation is growing, gold will benefit greatly.”
Jefferies buckle by numbers
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Among the individual stocks, the stock fell by Jefferies up 9.3 percent after the investment bank’s fourth-quarter earnings missed market expectations. Jefferies also announced it would increase its quarterly dividend by 20 percent to 30 cents. Citigroup stocks rose 0.3 percent after the bank said it would divest its consumer business in Mexico as part of strategic adjustments.
The of Microsoft (+1.0%) planned takeover of US software company Nuance Communications (+0.2%) is being examined by the British competition authority. The Competition and Markets Authority has launched a formal investigation to determine whether the merger would affect competition in the UK markets. Ally Financial rose 3.0 percent. The financial services company’s board had approved a dividend increase and a $2 billion share buyback program.
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