U.S. Stocks Seeing Substantial Volatility Following Inflation Data

wallstreet aug24 12jan23 lt

After moving notably higher over the past several sessions, stocks have seen substantial volatility over the course of morning trading on Thursday. The major averages have shown wild swings back and forth across the unchanged line.

Currently, the major averages are turning in a mixed performance. While the Nasdaq is down 3.26 points or less than a tenth of a percent at 10,928.41, the S&P 500 is up 4.81 points or 0.1 percent at 3,974.42 and the Dow is up 122.58 points or 0.4 percent at 34,095.59.

The volatility on Wall Street comes as traders digest the highly anticipated consumer price inflation data, which largely came in line with economist estimates.

The Labor Department said its consumer price index edged down by 0.1 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to come in unchanged.

The report also showed the annual rate of consumer price growth slowed to 6.5 percent in December from 7.1 percent in November, in line with expectations. The annual growth was the slowest since October 2021.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in December following a 0.2 percent uptick in November. The increase matched economist estimates.

The annual rate of core price growth slowed to 5.7 percent in December from 6.0 percent in November. The year-over-year growth was also in line with expectations.

While the slower price growth is encouraging, traders may feel the slowdown was priced into the markets with the upward trend seen in recent sessions.

"Overall, this latest report adds more weight to our view that CPI inflation will fall more rapidly than the Fed expects this year," said Paul Ashworth, Chief North America Economist at Capital Economics.

"But the Fed isn't going to stop raising interest rates until it sees accompanying evidence of an easing in labor market conditions and wage growth," he added. "It will be a couple more months before that evidence is also irrefutable."

The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended January 7th.

The report said initial jobless claims slipped to 205,000, a decrease of 1,000 from the previous week's revised level of 206,000.

The dip surprised economists, who had expected jobless claims to rise to 215,000 from the 204,000 originally reported for the previous week.

With the modest decrease, initial jobless claims fell to their lowest level since hitting 190,000 in the week ended September 24th.

Energy stocks are seeing considerable strength on the day, benefiting from a continued increase by the price of crude oil.

With crude for February delivery climbing $0.87 to $78.28 a barrel, the Philadelphia Oil Service Index is up by 1.9 percent and the NYSE Arca Oil Index is up by 1.8 percent.

Significant strength is also visible among airline stocks, as reflected by the 1.7 percent gain being posted by the NYSE Arca Airline Index.

American Airlines (AAL) has helped lead the sector higher, soaring by 6.0 percent after boosting its fourth quarter guidance.

On the other hand, computer hardware stocks have come under pressure, dragging the NYSE Arca Computer Hardware Index down by 2.6 percent.

A steep drop by Logitech (LOGI) is weighing on the sector, with the software and computer peripherals maker plummeting by 16.3 percent after cutting its sales outlook.

In overseas trading, most stock markets across the Asia-Pacific region moved modestly higher during trading on Thursday. Japan's Nikkei 225 Index closed just above the unchanged line, while China's Shanghai Composite Index inched up by 0.1 percent.

The major European markets have also moved to the upside on the day. While the German DAX Index is up by 0.6 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both up by 0.8 percent.

In the bond market, treasuries have seen considerable volatility over the course of the morning. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.1 basis points at 3.523 percent.

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