S&P 500 closed the day’s session up by 0.73%, Dow gained over 100 points while Nasdaq 100 jumped 1.09% on the day when US CPI data for November flowed in. The indices opened higher but slid down during the day and still managed to end the session in green. US stocks posted gains on the hope that the Fed may have a relook at its aggressive approach towards controlling inflation. The investors’ sentiments got a boost after the November US CPI data showed a fall in annual inflation, including a lower core-inflation number.
Latest Update: Federal Reserve raises rate by 50 basis points, seven of 19 officials seeing benchmark rates above 5.25% next year
The consumer price index (CPI) in the United States rose 7.1% year on year in November, compared to 7.7% year on year in October, and was lower than consensus estimates. Core inflation, which excludes food and energy, increased by 6%, down from 6.3% in October.
Also Read: Will US stocks surge and dollar, bond yields dip after the Fed rate hike today?
“US stock market already echoed and cheered the expectation of a lower CPI than the previous month. This is likely to boost investors’ sentiment across the globe as it suggests that Fed may turn dovish sometime in 2023 and set the launching pad for a mega bull market ahead,” says Dhawal Ghanshyam Dhanani, Fund Manager, (Foreign Funds), Samco Mutual Fund.
US Fed rate hike decision takes place today Wednesday, December 14. Even though the inflation has come down over the last 2-3 months, the markets are aware of the Fed chief Powell’s message – the terminal rate could be higher than expected earlier. A 50bps rate hike is expected from the Fed on Wednesday taking the total rate hike in 2022 to 425 bps.
Also Read: Good news for equity market as US CPI falls, now all eyes are on Powell’s commentary today
Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS., “We expect the US Fed to increase the benchmark rate by 50bps this week. Even with a 50bps hike, if the Fed Chairman comments that future action of the Fed will be data dependent, then the market will take it positively. But, if he mentions that inflation remains a major risk and the labor market remains tight, with a possibility of a second round impact on inflation from the tight labor market, then the markets might react negatively.
What the market would be interested in is comprehending the Fed’s message to the market. The post-rate hike conference will, therefore, be an important event to watch. When will the rate hikes pause and when does the Fed start cutting rates – this is something global investors will be keenly waiting for. Job market data also reinforces the view that Fed rate hikes are slowing down the economy, however, till now it has not been seen. Many market participants are of the view that rate cuts could happen in the second half of 2023 especially if there’s a recession with a hard landing on the economy.