The First Slice for Thursday, January 13, 2022

(MarketWatch) — U.S. stock indexes closed with modest gains Wednesday after reading on inflation came in near a four-decade high.

  • The Dow rose +38.30 or +0.11%
  • The S&P 500 added +13.28 or +0.28%
  • The Nasdaq rose +34.94 or +0.23%

Stocks were buoyed Wednesday as investors exhaled with relief after the latest reading on inflation, while running hot, wasn’t worse than anticipated. 

The consumer-price index posted a monthly rise of 0.5% in December, as prices rose by a near 40-year high of 7% from a year ago, while also indicating elevated U.S. inflation could persist well into 2022.

The gain in the consumer price index exceeded the 0.4% forecast of economists polled by The Wall Street Journal. Increases were driven largely by elevated costs for food, shelter, and used cars, even as energy prices briefly fell from recent highs.

A separate measure of consumer inflation that strips out volatile food and energy prices rose 0.6% last month, the government said Wednesday. That pushed the increase over the past 12 months to 5.5% from 4.9%—a 31-year high.

St. Louis Fed President James Bullard said Wednesday that four interest rate increases now appear likely to be needed to tackle high inflation, in an interview with The Wall Street Journal following the latest inflation data. 

Worries about runaway prices, and the Fed’s response, have helped the S&P 500/Citigroup pure value index rise 5.5% this year as the S&P 500/Citigroup pure growth index has retreated 5.1%.

However, climbing oil prices potentially could still add to consumer woes. “Since year-end, oil prices have jumped nearly 10%, with WTI currently sitting at $82 per barrel, suggesting that inflationary pressures from energy are likely to re-emerge,” Steve Chiavarone, Federated Hermes’ head of multiasset solutions, wrote in emailed comments Wednesday.

Investors now also are eager for a blueprint from the Federal Reserve on how it plans on reducing its balance sheet, including potentially selling assets, a tool Chairman Jerome Powell didn’t rule out Tuesday, in his confirmation hearing for a second term at the helm of the central bank.

Cleveland Fed President Loretta Mester on Wednesday said she backs the central bank shrinking its balance sheet “as fast as we can,” so long as the pace doesn’t hurt financial markets. Bullard said he favored a “passive runoff” in which the balance sheet declines as assets mature without being replaced.

Should the Fed start selling Treasurys and mortgage-backed securities, instead of letting them roll off the balance sheet, it would mark “a major change in the past 10-12 years of monetary policy,” Engelke said. 

  • Jefferies Inc. JEF said Wednesday its fourth-quarter net income rose 6% to $324.9 million, or $1.20 a share, from $307.3 million, or $1.11 a share in the year-ago quarter. Shares fell 9.3%. 
  • Shares of Pfizer Inc. PFE closed 0.1% lower after the company said administering the Prevnar 20 pneumococcal disease shot at the same time as the COVID-19 vaccine and booster it developed with BioNTech SE BNTX produced the same response. 
  • Shares of Intuitive Surgical IncISRG fell 1.5%, after the minimally invasive care company provided an upbeat fourth-quarter revenue outlook, on strength in instruments and accessories and as the COVID-19 resurgence hurt results. 
  • Popular Inc. BPOP said Wednesday it expects to repurchase $500 million worth of its stock in 2022, and that it raised its quarterly dividend by 22%, to 55 cents a share from 45 cents. Its stock rose 0.4%. 
  • DirecTV and Dish Network are in fresh talks to merge after years of on-again, off-again wrangling and multiple clampdowns from federal antitrust officials, the New York Post reported. Shares of Dish advanced 2.8%. 
  • Shares of Tesla Inc. were in focus, closing up 3.9%, after a teenager, calling himself a 19-year-old security specialist and hacker, said that he had hacked into the software systems of nearly two dozen Tesla electric-powered vehicles and had limited control over them. 
  • Oil futures extended gains on Wednesday, with West Texas Intermediate crude CL00 for February delivery CLG22 rising 1.8% to settle at $82.64 a barrel.
  • Gold futures GC00 edged up 0.5% ending at $1,827.30 an ounce. 
  • Bitcoin BTCUSD was up 2.6% at $43,920.

Full Loaf Hot LinkOriginal Article By: Joy Wiltermuth

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