Marketbites: Promising Inflation Report
Portfolio Manager Commentary:
Stocks initially rallied after the consumer price index showed an increase of just 0.1% from the previous month, and a gain of 7.1% from a year ago, the Labor Department reported Tuesday. Economists surveyed by Dow Jones had been expecting a 0.3% monthly increase and a 7.3% yearly rise. Excluding volatile food and energy prices, core CPI rose 0.2% on the month and 6% on an annual basis, compared to respective estimates of 0.3% and 6.1%.
However, major indexes came off their best levels as the day continued. Energy stocks led the gains, with shares of Chevron the leading outperformer in the Dow.
Investors are anticipating the Federal Reserve’s next rate-hiking decision at the conclusion of its two-day policy meeting on Wednesday. Traders are largely pricing in a 50-basis point increase, a slight decline from the previous four hikes.
Chart of the Day:
November’s CPI report offered possible signs wage pressures could be easing. Services price increases, excluding housing and health insurance, contributed less to core inflation in November compared with the prior two months. Dining out—a service for which labor composes a relatively large share of costs—rose 0.5% in November from the prior month, a marked slowdown from the 0.9% average pace from June to October, as price gains for both sit-down meals and fast food eased.