Investors Bid Up Stocks Ahead Of Inflation Report

Barry Adams
11 Jan, 2023
New York City

Benchmark indexes closed higher and tech heavy indexes rose on the hopes of moderating inflation in December. 

The Nasdaq Composite index increased for the fourth session in a row on the expectations that moderating inflation may slow future rate hikes. 

Investors are looking for inflation to moderate to as low as 6.7% after gasoline prices plunged 12% in December from the previous month. 

On a monthly basis, inflation is expected to be flat after rising for four months in a row and 0.1% increase in November. 

Core inflation which excludes food and energy prices are expected to accelerate on a monthly basis to 0.4% in December from 0.2% in November. 

Consumer price index in November rose 7.1% on an annual basis and core inflation excluding food and energy jumped 6.0%, the Bureau of Labor Statistics reported last month. 

JP Morgan, Wells Fargo, Bank of New York Mellon, Citigroup and Bank of America are scheduled to release earnings on Friday. 

 

U.S. Indexes In Review 

The S&P 500 index increased 1.3% to 3,969.61 and the Nasdaq Composite index rose 1.8% to 10,931.67.

Crude oil prices rose as much as 2% on the hopes of recovering global demand as business activities in China recover and the government takes steps to support higher economic growth. 

Crude oil increased $2.78 to $77.83 a barrel and natural gas rose 5 cents to $3.69 a thermal unit.

Treasury bond yields edged lower ahead of the inflation report as investors estimated moderating of inflation in December after the recent drop in energy prices. 

The yield on 2-year Treasury notes edged lower to 4.22%, 10-year Treasury notes to 3.54% and 30-year Treasury bonds to 3.67%. 

 

European Markets Extend Gains On Moderating Inflation 

European markets extended this year's gains on the hopes of inflation moderation. 

ECB board member Isabel Schnabel and the governing council member Robert Holzmann made comments supporting a gradual increase in rates to restrictive levels to lower inflation to 2%. 

Government bond yields in the region drifted lower and extended the two-week decline on the hopes of moderating rate hikes. 

The yield on Italian government bonds dropped to  4% and the German Bunds traded below 2.2%, away from the 11-year high 2.6% reached on December 30.   

Investors also awaited the release of December month U.S. inflation data on Thursday. 

U.S. consumer price index in November rose 7.1% on an annual basis and core inflation excluding food and energy jumped 6.0%,the Bureau of Labor Statistics reported last month. 

The December month inflation is expected to hover near 7% and core inflation is expected to edge slightly lower. 

JP Morgan, Wells Fargo, Bank of New York Mellon, Citigroup and Bank of America are scheduled to release earnings on Friday. 

 

Italy's Retail Sales Rebounded In November 

Italy's retail sales in November rose 0.8% after falling 0.3%in October, data from the statistical office Istat showed Wednesday. 

Sales of food increased 0.3% and non-food items rose 1.0% on a monthly basis and on an annual basis retail sales jumped 4.4% after rising 1.2% in October. 

Retail sales have been rising since March 2021. 

 

European Bond Yields Slide On Moderating Inflation Hopes 

The yield on 10-year German Bunds decreased to 2.19%, French bonds decreased to 2.67%, UK Gilts to 3.39% and Italian bonds to 4.03%.

The euro edged higher to $1.07 and the British pound increased to $1.21.

 

Crude Oil Advances On China Hopes 

Crude oil prices rose as much as 2% on the hopes of recovering global demand as business activities in China recover and the government takes steps to support higher economic growth. 

Brent crude oil increased $1.37 to $81.45 a barrel and the Dutch TTF natural gas futures contract edged down 6.3% to