US stocks rise after latest inflation report shows progress on rate hikes

CNN
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More recently, progress in inflation appeared to be holding steady or at worst reversing: A closely watched measure of underlying price increases – an index that excludes highly volatile categories – had not budged for months.

On Wednesday it loosened.

The closely watched core measure of the consumer price index fell for the first time in months, according to Bureau of Labor Statistics data released Wednesday. That reading, combined with some better-than-expected wholesale inflation data received on Tuesday, spurred optimism in the markets.

US stock futures rose on Wednesday morning as the CPI report boosted traders’ hopes that the Federal Reserve will continue its rate-cutting campaign this year. Dow futures rose more than 600 points. S&P futures rose 1.5% and Nasdaq futures were higher 1.8%.

Overall, the consumer price index rose more than expected, rising 0.4% from November and rising 0.2 percentage points to an annual rate of 2.9%. However, the increase was largely driven by gas and food prices.

Energy prices, particularly gas and fuel costs, accounted for 40% of the overall monthly increase. Food prices also remained high as key commodities such as meat and eggs continued to face pressure from weather and disease respectively.

However, in the context of inflation targeting, energy and food are two of the most volatile categories and can fluctuate wildly due to factors considered to be one-off in nature.

Excluding energy and food, the closely watched core CPI gauge fell for the first time in months, rising just 0.2% from November, falling to 3.2% after holding steady at 3.3% since September 2024.

Wednesday’s report marked the final CPI reading for 2024 and the last before President Joe Biden hands over the keys to President-elect Donald Trump. While the reasons for this recent bout of inflation were multi-faceted and largely related to the Covid-19 pandemic and its fallout, the sharp rise in prices hit Americans hard and proved to be a critical factor at the polls.

Economists expected inflation to rise 0.3% from November and an annual increase of 2.8%, mainly due to expectations of higher energy and food prices.

The CPI measures price changes across commonly purchased goods and services.

This story is in development and will be updated.