Jan 12, 2022, 02:06pm
The stock market moved slightly higher on Wednesday even after consumer prices jumped again last month, suggesting a good deal of uncertainty has already been priced into the market as investors seemed to shake off the bad news.
Markets weren't phased by the latest reading of inflation, which was at nearly 40-year highs.
Richard Drew is an Associated Press photographer.
The S&P 500 gained 0.1% and the tech-laden Nasdaq was up 2%.
Despite consumer prices jumping another 7% last month on a yearly basis, the largest annual increase since June 1982, the market made small gains on Wednesday.
Overall prices rose in line with what economists had been expecting, but there was a small decline from the previous month.
Despite the grim inflation data on Wednesday, the stock market held its ground thanks to comments from Federal Reserve chairman Powell who said tighter monetary policy was needed to control rising prices.
The Fed will begin raising interest rates after it ends its monthly asset purchases in March.
Tech stocks, which have suffered a steep sell-off so far in the new year, rebounded somewhat on Wednesday, with shares of Microsoft and Alphabet each rising nearly 1.5%.
Vital Knowledge founder Adam Crisafulli says that the consumer price index reading on Wednesday could have been worse. He says that the slight increase in consumer prices since last month is in line with expectations and that the current environment is better-than-feared. The numbers are not good, with inflation still running hot, but they don't change the Federal Reserve's outlook or expectations.
The stock market surged higher after Powell testified before the Senate. If inflation continues, the central bank will raise interest rates more than projected, according to the Fed chair. Powell said that they will raise interest rates more. We will use our tools to get inflation back.
What to watch for.
Will it hold? The market is giving the Fed the benefit of the doubt, but the risks are rising that inflation will force the Fed into a rate-hiking cycle that will result in a shock to the stock market. Inflation is a concern in this case, and that could be the difference between now and 4 years ago.
Inflation hit a new 39-year high in December.
Powell said the Fed wouldn't be afraid to raise rates if inflation goes up.
The Fed minutes show the central bank could remove moreStimulus.
Gas and meat prices have fallen, but cars, housing, medical care, and more still fuel inflation.
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