Inflation Data Tempers Post-Election Rally: US Stocks Mixed as CPI Rises 2.6% Annually
US Stocks Mixed as Inflation Data Impacts Post-Election Rally
US stocks showed mixed performance on Wednesday as investors digested the latest inflation data and its potential impact on interest rates. The much-anticipated inflation figures, which aligned with economists’ expectations, appeared to dampen the momentum of the post-election stock rally.
The Consumer Price Index (CPI) rose 0.2% for the month and 2.6% annually, meeting projections but slightly higher than the previous year-over-year reading. This data has influenced market sentiment regarding potential interest rate cuts by the Federal Reserve.
In response to the economic indicators, major US indices closed with varied results. The Dow Jones Industrial Average saw a modest increase of 0.11%, closing at 43,958.19. The S&P 500 remained nearly flat, edging up just 0.02% to 5,985.38. The tech-heavy Nasdaq Composite, however, dipped into negative territory, closing down 0.26% at 19,230.74.
Investors are now reassessing the likelihood of interest rate cuts. While confidence remains high for a rate cut in December, with an 82% probability, the odds of a January rate cut have dropped to 29%, reflecting growing uncertainty.
Bill Adams, Chief Economist at Comerica Bank, suggested that the inflation data supports a December rate cut. However, Jason Pride, Chief Investment Officer of Private Wealth at Glenmede, cautioned about the risks associated with premature easing by the Fed.
The post-election rally, initially fueled by former President Trump’s victory, began to lose steam as market participants shifted focus to economic fundamentals. In an unexpected political development, Elon Musk’s appointment as co-head of the Department of Government Efficiency provided a boost to cryptocurrency markets, with Dogecoin surging 15% and Bitcoin briefly touching $90,000 before settling around $88,000.
In commodities, West Texas Intermediate crude oil fell 0.09% to $68.08 per barrel, while Brent crude decreased by 0.46% to $71.95 per barrel. Gold also saw a decline, dropping 0.87% to $2,575.98 per ounce. The 10-year Treasury yield inched up by one basis point to 4.449%.
As markets continue to navigate the post-election landscape and digest economic data, investors remain watchful of potential policy shifts and their implications for various sectors and asset classes.
