Stocks Rise After Report Suggests Worst of Inflation Is Over

Moderna jumped 19.6% after delivering good news on skin cancer vaccine
By Newser Editors and Wire Services
Posted Dec 13, 2022 3:54 PM CST
Inflation Reports Gives Markets a Boost
Traders work on the floor at the New York Stock Exchange.   (AP Photo/Seth Wenig)

Stocks closed higher on Wall Street Tuesday after the government reported that inflation cooled more than expected last month, cementing expectations that the Federal Reserve is about to dial down the size of its interest rate hikes. The Fed is widely expected to raise its benchmark rate a half-point Wednesday, smaller than the past four mega-increases of three-quarters of a point. The S&P 500 rose 29.09 points, or 0.7%, to 4,019.65. The Dow Jones Industrial Average rose 103.60 points, or 0.3%, to 34,108.64. The Nasdaq rose 113.08 points, or 1%, to 11,256.81. Treasury yields fell sharply. The yield on the two-year Treasury, which tends to track expectations for what the Fed will do, dropped to 4.22% from 4.39%.

Markets were boosted by data showing that US inflation slowed to 7.1% last month from 7.7% in October and more than 9% in the summer. Even though inflation remains painfully high, and shoppers continue to pay prices well above levels from a year ago, Tuesday’s report offers hope that the worst of inflation really did pass during the summer, the AP reports. More importantly for markets, the slowdown bolstered investors’ expectations that the Federal Reserve will downshift to an increase of 0.50 percentage points when it announces its next hike to short-term rates on Wednesday.

Despite the encouraging data, analysts cautioned that the Federal Reserve's fight against inflation—and its hikes to interest rates—still has further to go. Even if the Fed is moving at smaller increments each time, it may still ultimately take rates higher than markets expect. "That downshift should not be conflated with a pivot," says Jake Jolly, senior investment strategist at BNY Mellon Investment Management. "It’s going to be a bumpy, long slog and probably going to take most of next year." Energy and tech stocks were among the biggest gainers, with Chevron up 2.2% and Meta up 4.4%, CNBC reports. Moderna jumped 19.6% after giving investors an encouraging update on a potential skin cancer vaccine. Tesla fell 4.1%. Elon Musk, the company's CEO, is no longer the world's richest man.

(More stock market stories.)

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