Wall Street rose 0.64%, the Nasdaq index rose 0.64% and the broader S&P 500 index gained 0.34%. The event of the day, expected for several days, was the release of the CPI price index, which came out down 0.1% over one month in December, in line with economists’ forecasts.
The good news is that inflation fell to 6.5% from 7.1% the previous month. This is the sixth consecutive month of slowing inflation in the U.S., following June’s peak of 9.1%. The decline in inflation “should convince the Fed (U.S. central bank) to slow the pace of its rate hikes at its next meeting,” on January 31 and February 1, said Jeffrey Roach of LPL Financial, who, like almost all investors, is counting on a hike of only a quarter point.
“Our base case is that the economy will slow down enough for the Fed to consider cutting rates in the second half of the year,” he added. The bond market’s reaction reflects traders’ view of a more moderate monetary policy from the Fed in the months ahead.
The 10-year U.S. government bond yield eased to 3.43% from 3.53% the previous day. As for the 2-year rate, which better reflects the expectations of operators in terms of monetary policy, it fell to 4.10% for the first time in over three months.
“It was the bond market that set the course, and the equity markets followed,” said Angelo Kourkafas of Edward Jones. Bond prices move in the opposite direction of their rates, meaning they rose significantly on Thursday, Jan. 12. The Nasdaq on Thursday, January 12, chained a fifth consecutive positive session, brightened by a wave of purchases of technology stocks.
In addition to Microsoft (+1.16%), it is the most volatile stocks on the market that have been the most sought after, such as the manufacturer of graphics cards Nvidia (+3.19%), Meta (+2.87%) or semiconductor specialists Qualcomm (+2.70%) and AMD (+2.52%).
Crypto-currencies were at the party, like bitcoin, which took more than 7%. Cryptocurrency mining company Riot Platforms (+14.53%), exchange platform Coinbase (+8.59%) and Silvergate Capital (+12.89%), parent company of the “crypto bank” Silvergate Bank, all paced.
“The risk is that the market gets carried away, that investors get comfortable, and that financial conditions ease, which the Fed fears,” warned Angelo Kourkafas.
However, he considers the prospects for further progress of stocks limited, “because the risk of a contraction in corporate earnings remains,” he said, referring to the start of the earnings season on Friday, January 13, which should inform on the financial health of companies.
The airline company, American Airlines has soared (+9.71% to 16.83 USD) after the revision upwards of its results forecasts for the fourth quarter. The Fort Worth, Texas-based company more than doubled the low end of its earnings per share range from its previous estimate.
The news benefited the entire airline sector, whether it was United Airlines (+7.52%), Delta Airlines (+3.72%) or even the unloved Southwest Airlines (+2.78%). New York-listed Taiwanese semiconductor giant TSMC was propelled (+6.38% to USD 87) by record results, with net profit up 78% in the fourth quarter compared to last year.
The group nevertheless warned that the first quarter would be hurt by weakening demand and a reduction in customer inventories, less concerned about supply chain tensions.
Disney was sought after (+3.61% to 99.81 USD), the day after the board of directors said it was opposed to the appointment of investor Nelson Peltz as a director. His investment company, Trian Fund Management, has recently taken a stake in the company and is pushing for short-term measures, in particular cost cutting.
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