Core CPI, which excludes food and energy, rose 0.2% in December after increasing 0.3% in each of the previous four months. The index rose 3.2% over the last 12 months, lower than an expected 3.3% rise.
Major U.S. indices surged Wednesday after consumer inflation came in lower than expected, and major banks posted strong fourth-quarter earnings.
According to the U.S. Bureau of Labor Statistics, the Consumer Price Index increased 0.4% seasonally adjusted in December after rising 0.3% in November, which aligns with an estimated 0.3%. Over the last 12 months, the index increased 2.9% before seasonal adjustment, again in line with market estimates.
Core CPI, which excludes food and energy, rose 0.2% in December after increasing 0.3% each of the previous four months. The index rose 3.2% over the last 12 months, lower than an expected 3.3% rise.
The index for food increased 0.3% in December after rising 0.4% in November, while the energy index rose 2.6% after rising 0.2% in November.
Notably, the shelter index increased 4.6% over the last year, registering the smallest 12-month increase since Jan. 2022.
Ellen Zentner, chief economist strategist at Morgan Stanley Wealth Management, told CNBC that the CPI may help the Federal Reserve feel a little more dovish.
“It won’t change expectations for a pause later this month, but it should curb some of the talk about the Fed potentially raising rates,” Zentner said. “And judging by the market’s initial response, investors appeared to feel a sense of relief after a few months of stickier inflation readings.”
According to the CME FedWatch tool, traders have factored-in over 97% probability that the Fed will hold rates in its January meeting. This shows the underlying skepticism among investors as inflation is still above the central bank’s targeted rate.
Following the release of the inflation report, the SPDR S&P 500 ETF Trust (SPY) traded 1.75% higher, while the Invesco QQQ Trust, Series 1 (QQQ) surged over 2%. However, retail sentiment on Stocktwits flipped into the ‘bearish’ territories for both these ETFs.
Retail investors’ comments indicated a skeptical view of the ETFs.
Meanwhile, SPY and QQQ have gained nearly 25% over the past year.
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