U.S. stocks turned lower Friday, but are still on pace for a solid weekly gains, as investors reacted to a key reading of consumer price inflation while tracking developments in coronavirus infections around major world economies.
November inflation accelerated to the fastest pace in four decades, with headline CPI tabbed at 6.8%, but most of the underlying tallies matched Wall Street forecasts, while the monthly gain for core inflation came in modestly lighter, potentially suggesting tamer readings to come.
Still, the implications for Federal Reserve policy are notable; Chairman Jerome Powell’s hawkish turn last week, alongside his decision to retire the word “transitory” in terms of inflation pressures, likely means a faster pace of bond purchase tapering from the central bank next week, as well as earlier-than-expected rate hikes later this summer.
“While the higher level of inflation is uncomfortable, it is also expected. For investors, those without some degree of commodity or other inflation offsets should start to incorporate those segments into their portfolio,” said George Bell, chairman of Houston-based investment group Sanders Morris Harris.
“We expect inflation to top 5% in the first half of 2022 and it’s likely to subside modestly to 4% or so during the second half of 2022,” he added. “Those aren’t great numbers but neither will they require Volckerian intervention.”
The Dow Jones Industrial Average marked 22 points lower in late-morning trading, while the S&P 500 gained 7 points. The tech-focused Nasdaq Composite fell 25 points as benchmark 10-year Treasury note yields eased to 1.48% in early New York trading following the in-line inflation release.
Moderna (MRNA) – Get Moderna, Inc. Report shares were active in early trading, falling 12% after the drugmaker posted promising early stage data from its developing seasonal flu vaccine as investors await an update on the efficacy of its Covid vaccine against the newly-identified Omicron variant.
Oracle (ORCL) – Get Oracle Corporation Report shares, meanwhile, surged 17% to a fresh all-time high after the cloud-focused software group posted better-than-expected second quarter earnings and a robust near-term outlook.
Costco Wholesale (COST) – Get Costco Wholesale Corporation Report shares gained 3.6% after the bulk discount retailer posted stronger-than-expected third quarter earnings while cautioning that supply chain disruptions could impact holiday season inventories.
Broadcom (AVGO) – Get Broadcom Inc. Report shares leapt 9.6%, lifted by a wave of positive news on sales and earnings, a dividend boost, the unveiling of a new stock repurchase program and the company’s growth outlook on the hyper-cloud front.
Tesla (TSLA) – Get Tesla Inc Report shares, too, were active, slipping 1% as CEO Elon Musk continues to offload Tesla stock, with the world’s richest man dumping another near-$1 billion worth of his electric car company’s shares.
In overseas markets, Europe’s Stoxx 600 was marked 0.05% higher in mid-afternoon trading in Frankfurt following the U.S. inflation data, while the Asia region MSCI ex-Japan index closed out the session with a 0.8% decline.
WTI crude futures for January delivery were marked 68 cents higher from Thursday’s close to change hands at $71.62 per barrel while Brent contracts for February, the global pricing benchmark, gained 62 cents to $75.03 per barrel.
