Day Traders Diary

1/12/23

The major averages closed higher once again after December's consumer price report showed inflation cooled for the month, raising hopes the Federal Reserve can once again slow interest rate hikes. The Dow Jones Industrial Average gained 216 points, or 0.6%. The S&P 500 added 13 points or 0.3%. The Nasdaq Composite rose 69 points or 0.6% as it attempts to post a five-day winning streak, which would be a first for the technology-heavy index since July.

The Nasdaq is on pace for the biggest weekly increase of the three indexes, gaining 4.1% so far as investors picked up beaten-down growth stocks ahead of the CPI report. The S&P 500 and Dow are also poised for weekly advances of 2.3% and 1.7%, respectively.

The December report showed a 0.1% dip in prices from November, but prices were still 6.5% higher than the prior year. That's in line with what economists polled by Dow Jones expected. In November, the report showed a 0.1% monthly gain and an annual pace of 7.1%.

The CPI excluding food and energy prices was also in line with expectations, showing a month-over-month gain of 0.3%. The so-called "core" index was 5.7% higher in December than a year ago.

"I think the markets are pleased, but they don't seem to be overly excited," said Sandi Bragar, chief client officer at Aspiriant, of the reaction to the CPI report. "Any news in the right direction can make the markets happy these days."

Stocks rallied in recent sessions as investors bet the CPI report would confirm a weakening inflation trend. Investors have watched in recent months for data signaling cooling inflation in hopes it can give the Fed justification for further slowing interest rate hikes.

Boston Fed President Susan Collins said in an interview with the New York Times Wednesday that she's leaning toward a smaller, quarter-percentage-point rate hike at the next meeting. Investors will further parse remarks to be given by Collins and two other senior Fed officials on Friday.

Big banks including JPMorgan, Bank of America, Citigroup and Wells Fargo are set to report quarterly earnings Friday. Delta Air Lines is also slated to report.