World Stocks Extended Weekly Rally After U.S. Inflation Cooled

Barry Adams
12 Jan, 2023
New York City

Benchmark indexes traded higher after inflation moderated in December raising hopes of yet another trim in rate hike at the next meeting at the end of the month. 

Consumer prices rose at a slower pace in December, the slowest in fifteen months, after gasoline inflation cooled at the fastest pace in the year. 

Rising transportation costs and elevated housing costs, fueled the inflation in December. 

Weakening inflation extended gains in tech stocks for the fifth session in a row and the Nasdaq Composite advanced 4.1% in the week so far. 

Moreover, weekly jobless claims fell 1,000 to 205,000 for the week ending on January 7, the Department of Labor reported Thursday. 

The initial jobless claims dropped to a one-month low highlighting the labor market strength despite seven rate hikes in 2022. 

U.S. December Inflation Moderated  

The Consumer Price Index inflation fell 0.1% in December from November and eased to 6.5% on an annual basis, the BLS reported Thursday. 

The inflation index declined for the first time since May 2020 and seems to have peaked at 9.1% in June 2020. 

Energy prices rose 7.3% and food prices advanced 10.4% from a year ago and price increases for both categories were smaller than the rise in November. 

Core inflation accelerated to 0.3% from November and eased to 5.7% from a year ago. 

Cost of shelter stayed elevated and increased 0.8% on a monthly basis and jumped 7.5% from a year ago.  

Despite the easing of inflation, price increases are still significantly ahead of the Federal Reserve's target of 2%. 

 

U.S. Indexes In Review 

Benchmark indexes struggled in early trading after consumer price inflation was in line with expectations.  

The S&P 500 index increased 0.3% to  3,983.17 and the Nasdaq Composite index increased 0.6% to 11,001.10.  

Crude oil rose 93 cents to $78.34 a barrel and natural gas increased 1 cent to $3.69 a thermal unit. 

The yield on 2-year Treasury notes eased to 4.13%, 10-year Treasury notes edged lower to 3.42% and 30-year Treasury bonds inched lower to 3.56%. 

 

U.S. Stock Movers 

American Airlines Group Inc jumped 5.2% to $16.13 after the airline raised its fourth quarter revenue outlook on higher demand stronger-than-estimated prices. 

The company estimated fourth quarter total revenue to rise between 16% and 17% from the comparable quarter in 2019, higher than its prior guidance of up 11% to 13%.

The airline also lifted its adjusted earnings per share outlook range between $1.12 and $1.17 from 50 cents to 70 cents. 

The company said it has achieved more than half of its goal to reduce total debt by $15 billion by the end of 2025, with total debt down more than $7.5 billion in the first 18 months of the program.

Delta Air, United Airlines and Southwest rose between 2% and 3%.  

Bed Bath & Beyond added 15.5% to $4.02 extended rally to the second day after meme-stocks gained and speculators bid up stock of the struggling retailer. 

Bed Bath & Beyond stock has soared more 170% in the last five trading days. 

Cleveland-Cliffs Inc jumped 4.4% to $20.09 after Morgan Stanley lifted its stock rating to "overweight" from an "equal-weight."

Morgan Stanley analyst lifted its stock price target to $26 from $13.60.  

Revenue in the third quarter ending in September declined to $5.7 billion from $6.0 billion a year ago. Net income fell to $165 million or 29 cents from $1.3 billion or $2.33 a diluted earnings per share. 

Cognizant Technology Solutions Corp soared 8.1% to $66.44 after the company appointed former Infosys president Ravi Kumar as chief executive and a member of the board. 

The company also raised its estimate for the fourth quarter to $4.8 billion from the previous range between $4.72 billion and $4.77 billion. 

The company also estimated full-year 2022 adjusted earnings per share between $4.38 and $4.40 from the previous guidance between $4.43 and $4.46. 

Walt Disney Co increased 3.4% to $99.30 after the company elected independent director Mark Parker as chairman of the board and geared up for a proxy battle with activist investor Nelson Peltz.  

Infosys Ltd ADR increased 0.6% to $18.23 after the India-based tech services provider reported December quarter revenue increased 9.6% to $4.66 billion. 

Net income in the quarter increased to $800 million from $774 million and diluted earnings per share rose to 19 cents from 18 cents a year ago. 

The  company also said it has initiated the purchase of its stock on December 7 and as of today acquired 31.3 million or $600 million worth of its stock. 

The company has acquired 51.5% of total authorization of ?9,300 crore (about $1.15 billion) at an average price of ?1,531 per share (or $18.80), compared to maximum buyback price of ?1,850 per share (or $22.70).

KB Home declined 3.4% to $34.71 after the home-builder reported slightly weaker-than-expected quarterly results. 

Revenue in the fourth quarter 16% to $1.94 billion and homes delivered increased 3% to 3,786 and average selling price rose 13% to $510,400. 

Net income increased to $216.4 million from $174.2 million and diluted earnings per share increased to $2.47 from $1.96 a year ago.

The home-builder estimated revenue in the fiscal first quarter to range between $125 billion and $1.4 billion and average home price to range between $490,000 and $500,000.  

Logitech International SA plunged 17.1% to $56.35 after the computing devices maker lowered its sales outlook. 

Logitech said preliminary revenue in the fiscal third quarter ending In December between $1.26 billion and $1.27 billion, a decline between 22% and 23% in the U.S. dollars.  

Preliminary GAAP operating income is estimated to range between $171 million and $176 million, down between 33% and 35%, compared to $263 million in the same quarter a year ago.

 

European Markets Advance to 9-month Highs 

European markets extended gains to 9-month highs on the expectations of moderating inflation worldwide and ahead of the U.S. inflation report later today. 

The indexes accelerated gains after the U.S. inflation eased to 6.5% in December on the sharp decline in gasoline prices and declined 0.1% from the previous month, the Bureau of Labor Statistics reported Thursday. 

 

Europe Indexes In Review 

The DAX index increased 0.7% to 15,058.30, the CAC-40 index advanced 0.7% to 6,975.68 and the FTSE 100 index traded higher 0.9% to 7,794.04. 

Brent crude oil closed up $1.56 to $84.23 a barrel and the Dutch natural gas futures contract price rose 2.2% to