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U.S. stocks edged higher Thursday as investors digested fresh inflation data that showed prices increased at a slower annual rate in December, a report that was in line with expectations from economists.
The S&P 500 (^GSPC) added 0.3%, while the Dow Jones Industrial Average (^DJI) rose 0.6%. The technology-heavy Nasdaq Composite (^IXIC) also increased about 0.6%.
U.S. Treasury yields ticked down. The yield on the benchmark 10-year U.S. Treasury note fell to 3.4% from the 3.5% Thursday morning. The dollar index fell 0.9% to $102.25.
The moves came after data from the Bureau of Labor Statistics showed prices in December decreased 0.1% over the prior month but increased 6.5% over the prior year. That was in line with expectations, as year-over-year inflation cooled from 7.1% a month earlier.
Core CPI, excluding volatile food and energy components, prices climbed 5.7% year-over-year and 0.3% over the prior month. The core CPI reading came in line as expected from Bloomberg economist forecasts.
The report will factor heavily into the Federal Reserve’s next monetary policy meeting, which starts Jan. 31. Central bankers have made clear they aren’t done with interest rates increases. Fed Chair Jerome Powell stressed on Tuesday the importance of stable inflation, which could lead the central bank to take actions that are necessary, even if not popular.
On Wednesday, Boston Federal Reserve leader Susan Collins supported a 0.25 point interest rate increase at the central bank’s next meeting. Echoing those remarks, Philadelphia Fed President Patrick Harker said on Thursday that he thinks rate increases should be 25 basis points “going forward.”
Fed policymakers have taken an aggressive path that included four consecutive three-quarter point adjustments. The Fed slowed down with a half-point rate move in December, but some market strategists say the fresh inflation data gives no indication whether or not the central bank will make changes to their interest rate decisions.
After so much fanfare and focus on today’s CPI report, the release is a little underwhelming,” Seema Shah, Chief Global Strategist at Principal Asset Management, wrote in a statement following the inflation data.
“Not only are the numbers exactly in line with consensus expectations, but they don’t really clear up the 25-basis-point vs. 50-basis-point question for the Fed’s February meeting and add nothing to the late-2023 Fed pivot debate either,” Shah added.
Meanwhile, initial jobless claims in the first week of 2023 came in lower at 205,000 compared to expectations of 215,000, while continuing jobless claims also came down to 1.63 million compared to the prior week of 1.694 million.
Brent crude, the global oil benchmark, ended the day at $84.03 a barrel, while WTI, its U.S. counterpart, finished the day higher at $77.41. Both represented more than 1% increases.
In market-specific moves, shares of Disney (DIS) rose 3.6% as the media giant faces an upcoming proxy battle as shareholders voted against activist investor Nelson Peltz in his effort to win a spot on the company’s board.
Shares of KB Home (KBH) fell nearly 2.8% after the homebuilder reported a miss on revenue and profits as net orders plunged and it dealt with a significant backlog of homes.
American Airlines (AAL) shares were up 9.7% after the carrier increased its guidance on earnings for the fourth quarter. The company expects adjusted earnings per share of $1.12 to $1.17, up from a previous estimate of $0.50 to $0.70. This follows the Federal Aviation Administration system outage on Wednesday that cascaded into a nationwide logjam at U.S. airports.
Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSM) shares were up 6.3% after the company warned on Thursday of a revenue drop for the current quarter and could cut this year’s capital expenditures compared to last year due to a slowing global economy.
Investors continue to watch shares of beleaguered retailer Bed Bath & Beyond (BBBY) as bankruptcy bets mount. The meme stock has spiked 200% this week.
Elsewhere, Bitcoin rose nearly 8% on Thursday to trade around $18,796. The cryptocurrency is on track for its longest winning streak since July 2020, according to data compiled by Bloomberg.
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