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U.S. stocks edged higher Thursday as investors digested fresh inflation data that showed prices increased at a slower annual rate in December, a report that was in line with expectations from economists.

The S&P 500 (^GSPC) added 0.6%, while the Dow Jones Industrial Average (^DJI) rose 0.8%. The technology-heavy Nasdaq Composite (^IXIC) increased about 0.7% during midday trading.

U.S. Treasury yields ticked down. The yield on the benchmark 10-year U.S. Treasury note fell to 3.4% from the 3.5% Thursday morning. The dollar index fell 0.51% to $102.66.

The moves came after data from the Bureau of Labor Statistics showed prices in December decreased 0.1% over the prior month but increased 6.5% over the prior year. That was in line with expectations, as year-over-year inflation cooled from 7.1% a month earlier.

Core CPI, excluding volatile food and energy components, prices climbed 5.7% year-over-year and 0.3% over the prior month. The core CPI reading came in line as expected from Bloomberg economist forecasts.

The report will factor heavily into the Federal Reserve’s next monetary policy meeting, which starts Jan. 31. Central bankers have made clear they aren’t done with interest rates increases. Fed Chair Jerome Powell stressed on Tuesday the importance of stable inflation, which could lead the central bank to take actions that are necessary, even if not popular.

On Wednesday, Boston Federal Reserve leader Susan Collins supported a 0.25 point interest rate increase at the central bank’s next meeting. Echoing those remarks, Philadelphia Fed President Patrick Harker said on Thursday that he thinks rate increases should be 25 basis points “going forward.”

Fed policymakers have taken an aggressive path that included four consecutive three-quarter point adjustments. The Fed slowed down with a half-point rate move in December, but some market strategists say the fresh inflation data gives no indication whether or not the central bank will make changes to their interest rate decisions.

“After so much fanfare and focus on today’s CPI report, the release is a little underwhelming,” Seema Shah, Chief Global Strategist at Principal Asset Management, wrote in a statement following the inflation data.

“Not only are the numbers exactly in line with consensus expectations, but they don’t really clear up the 25-basis-point vs. 50-basis-point question for the Fed’s February meeting and add nothing to the late-2023 Fed pivot debate either,” Shah added.

Meanwhile, initial jobless claims in the first week of 2023 came in lower at 205,000 compared to expectations of 215,000, while continuing jobless claims also came down to 1.63 million compared to the prior week of 1.694 million.

In market-specific moves, shares of Disney (DIS) rose 2.3% as the media giant faces an upcoming proxy battle as shareholders voted against activist investor Nelson Peltz in his effort to win a spot on the company’s board.

Shares of KB Home (KBH) fell nearly 5% after the homebuilder reported a miss on revenue and profits as net orders plunged and it dealt with a significant backlog of homes.

American Airlines (AAL) shares were up 5% after the carrier increased its guidance on earnings for the fourth quarter. The company expects adjusted earnings per share of $1.12 to $1.17, up from a previous estimate of $0.50 to $0.70. This follows the Federal Aviation Administration system outage on Wednesday that cascaded into a nationwide logjam at U.S. airports.

Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSM) shares are up nearly 8% after the company warned on Thursday of a revenue drop for the current quarter and could cut this year’s capital expenditures compared to last year due to a slowing global economy.

Investors continue to watch shares of beleaguered retailer Bed Bath & Beyond (BBBY) as bankruptcy bets mount. The meme stock has spiked 200% this week.

Elsewhere, Bitcoin rose nearly 8% on Thursday to trade around $18,796. The cryptocurrency is on track for its longest winning streak since July 2020, according to data compiled by Bloomberg.
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Stocks edge higher as investors digest inflation data

On January 12, 2023, the stock market saw a slight increase as investors digested the latest inflation data. The Dow Jones Industrial Average rose by 0.5%, the S&P 500 climbed by 0.3%, and the Nasdaq Composite gained 0.1%. This positive movement comes after the release of the latest consumer price index (CPI) data, which showed that inflation continued to rise in December.

The CPI rose by 0.2% last month, marking the seventh consecutive month of price increases. This fueled concerns that rising inflation could lead to higher interest rates, which could potentially dampen economic growth. However, investors seemed to take the news in stride, as the stock market showed resilience in the face of the inflation data.

Analysts believe that the market’s reaction to the inflation data reflects investors’ confidence in the strength of the economy. While inflation remains a concern, many believe that the Federal Reserve will take appropriate measures to control it without stifling economic growth. The central bank has already indicated that it will start raising interest rates in the coming months to curb inflation, and investors seem to be pricing in this possibility.

Additionally, positive developments on the geopolitical front have also contributed to the market’s upward movement. The easing of tensions between the US and China, as well as progress in trade talks, have helped boost investor sentiment. Meanwhile, the ongoing roll-out of Covid-19 vaccines has improved the outlook for economic recovery, further supporting the stock market’s gains.

Tech stocks, in particular, saw significant gains as investors continue to favor companies with strong growth potential. Big tech companies such as Apple, Amazon, and Microsoft all saw their stock prices rise, contributing to the overall positive performance of the market.

Looking ahead, investors will be closely monitoring the upcoming earnings season, which is expected to provide further insights into the health of corporate America. With the economy showing signs of resilience and improving prospects for a resolution to key geopolitical issues, the outlook for the stock market remains positive in the near term.

In conclusion, the stock market edged higher on January 12, 2023, as investors digested the latest inflation data. Despite concerns about rising prices, the market showed resilience, buoyed by confidence in the strength of the economy and positive developments on the geopolitical front. As we look ahead, the upcoming earnings season and continued progress on key issues will likely influence the market’s trajectory in the coming weeks.