S&P 500 rises despite inflation jump, stocks head for winning week

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, December 8, 2021.

Brendan McDermid | Reuters

The major averages rose on Friday, extending Wall Street’s strong rally this week, despite inflation hitting a 39-year high.

The Dow Jones Industrial Average rose about 50 points, or 0.1%. The S&P 500 rose 0.3% and the technology-focused Nasdaq Composite added 0.1%. All three averages are up solidly for the week.

Inflation soared 6.8% year-over-year in November to highest rate since 1982, the Labor Department said Friday. The print came in slightly higher than the 6.7% Dow Jones estimate. The consumer price index, which measures the cost of a wide-ranging basket of goods, rose 0.8% for the month.

Core CPI, which excludes food and energy prices, rose 0.5% for the month and 4.9% from a year ago, in line with estimates.

Some investors may have been anticipating an even hotter inflation reading than economists, leading to a relief rally following the number. DoubleLine’s Jeffrey Gundlach said in a call this week he fears inflation could soon top 7%.

Friday’s CPI “number might show the most inflation in decades, but it still came in right about as expected. This is actually a good thing, as the market has priced in higher inflation, so this could be viewed as a relief,” said Ryan Detrick, chief market strategist at LPL Financial.

A bright spot of the CPI report was that increases in used cars, lodging, and airfares were all lower than expected, said Detrick. These areas have been stubbornly high and this could be one of the first signs that inflation could be nearing a peak, he added.

Investors are also wary that a high inflation reading could lead the Federal Reserve to hasten the taper of its $120-billion monthly bond-buying program.

Oracle shares soared more than 13% on Friday, a day after the company posted better-than-expected quarterly results.

Airlines ticked lower on Friday. Southwest Airlines dropped 3.5% following another downgrade on Wall Street, this time from Goldman Sachs. United Airlines dropped 2% and Delta Air Lines dropped 2.5%.

Interactive fitness company Peloton added to its woes, slipping 4% after tumbling 11.3% on Thursday. Credit Suisse cut its view on the company, saying a return to gyms and shifts in consumer spending will weigh on profitability.

Friday’s moves came after the major averages ended the regular trading session lower, each snapping a three-day win streak. The Dow, moved less than a point lower, finishing at the flatline. The S&P 500 fell 0.7% and the tech-heavy Nasdaq Composite lost 1.7%.

Nevertheless, they all are on track to finish the week higher. The Dow is up 3.8% this week. The S&P 500 and Nasdaq Composite have risen about 3.5% each since Monday.

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