Wall St inches up after in-line inflation data eases investor fears

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(Reuters) -U.S. stock indexes rose on Wednesday after consumer prices data that largely met expectations eased some concerns about faster-than-expected interest rate hikes, with megacap technology stocks offering the biggest boost.

Data from the Labor Department showed its consumer price index increased 0.5% last month after rising 0.8% in November, while in the 12 months through December, the CPI surged 7.0% to its highest year-on-year rise in nearly four decades.

Economists polled by Reuters had forecast the CPI gaining 0.4% in December and shooting up 7.0% on a year-on-year basis.

“The fact that the core rate came in just about in line with expectations suggests that we’re beginning to see some sort of a decline going forward,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Nine of the 11 major S&P 500 sector indexes rose, with technology and consumer discretionary that house some of the biggest growth companies boosting the benchmark index.

Mega-cap companies including Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) Inc and Tesla (NASDAQ:TSLA) Inc extended gains, rising up to 2.8%.

Growth and technology stocks, hit by rising Treasury yields and hawkish commentary from the Federal Reserve, have staged a comeback this week, with investors watching a variety of metrics to decide whether to buy the rally or brace for more declines.

Big Tech was buoyed by comments from Fed Chair Jerome Powell on Tuesday which sounded less hawkish, easing concerns sparked by minutes from the central bank’s December meeting.

At 12:13 p.m. ET, the Dow Jones Industrial Average was up 9.21 points, or 0.03%, at 36,261.23, the S&P 500 was up 6.82 points, or 0.14%, at 4,719.89 and the Nasdaq Composite was up 19.18 points, or 0.13%, at 15,172.63.

JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C) and Morgan Stanley (NYSE:MS) will be kicking off the fourth-quarter earnings season on Friday, followed by results from Bank of America Corp (NYSE:BAC) on Jan. 19.

“Earnings may exceed expectations and that is what is keeping investors active despite knowing that the Fed is going to start tightening in the next several months,” said Eric Schiffer, chief executive officer of California-based private equity firm Patriarch Organization.

“You’ll also see less commentary on earnings calls referencing supply chain constraints this season.”

In sectors like air travel, however, the onset of Omicron could dampen earnings expectations, with analysts at Bank of America reckoning that the pandemic’s impact on corporate travel is the biggest risk to the airline industry.

Drugmakers Eli Lilly (NYSE:LLY) and Biogen (NASDAQ:BIIB) dropped 7.8% and 4.0% respectively.

The U.S. government Medicare program said on Tuesday it plans to cover Alzheimer’s treatments including Biogen’s Aduhelm but will require patients to be enrolled in a clinical trial, limiting access to more than many expected. This could impact Lilly that is also developing similar drugs.

Advancing issues outnumbered decliners by a 1.08-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.35-to-1 ratio on the Nasdaq. The S&P index recorded 37 new 52-week highs and one new low, while the Nasdaq recorded 47 new highs and 99 new lows.

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