Stock rise after CPI data reassures investors.
The dollar weakened, and a gauge of global equity markets edged higher on Friday after data showed consumer prices rose as expected in November, easing concerns the Federal Reserve would aggressively tighten monetary policy to combat inflation. Gold gained as rising inflation lifted its safe-haven appeal. At the same time, U.S. Treasury yields were little changed in a sign some bond investors do not see interest rate hikes starting as early as next year’s second quarter, as many equity investors do. The Fed’s plans to taper bond purchases, likely to be announced next week when policymakers meet, is in line with what the U.S. central bank has indicated, said Brian Pietrangelo, managing director of Investment Strategy at Key Private Bank. “The Fed’s been pretty transparent, which is why you’re seeing a positive move in the stock market today and not a lot of reaction in the bond market,” he said, noting he expects two or three interest rate hikes next year.
On Wall Street, the Dow Jones Industrial Average rose 0.41%, the S&P 500 advanced 0.67%, and the Nasdaq Composite gained 0.38%. Gains in information technology, led by Apple Inc., Microsoft Corp and Oracle Corp, pushed the S&P 500 and Nasdaq higher. But consumer staples was the biggest percentage gainer, up 1.8%, suggesting investors were carefully assessing the Fed’s next move. Analysts said that the dollar slid as the forex market was positioned for a higher CPI reading. “The FX market has been extremely long U.S. dollars for several months, so with this number coming in benign, we’re almost out of events that could push the dollar materially higher before year-end,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.