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Wall Street inches higher after CPI report, crude slides

by Jessica Weisman-Pitts
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2023 12 12T162347Z 1 LYNXMPEJBB0M4 RTROPTP 4 USA STOCKS

Wall Street inches higher after CPI report, crude slides

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks inched higher in choppy trading on Tuesday and the dollar dipped after a crucial report showed sticky U.S. inflation continues to meander along its slow, downward path as the Federal Reserve gathers for its December policy meeting.

Crude prices tumbled over worries of softening global demand, although the U.S. economy appears robust enough to withstand the Fed’s restrictive policy, for now.

The three major U.S. stock indexes fluttered in choppy trading before turning modestly higher, putting them on track to notch fresh closing highs.

The Labor Department’s Consumer Price Index (CPI) unexpectedly inched higher on a monthly basis in November, but edged lower on an annual basis, stoking concerns that inflation is taking longer to return to the Fed’s 2% target than many had hoped and raising the possibility that the central bank will keep policy rates in restrictive territory for longer than anticipated.

“There’s something for everyone in this release,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

“If you want to believe that inflation is reigniting, there are elements of the report that support that.” Ladner added. “If you want to believe inflation is cooling, you can find things in there to support that too.”

“We’re getting a middling reaction to a middling number.”

The Federal Open Markets Committee (FOMC) convenes today for its two-day monetary policy meeting, which is expected to culminate in a decision to leave the Fed funds target rate at 5.25%-5.50%.

The Fed is also expected to release its Summary Economic Projections and dot plot, which should shed light on the central bank’s path forward.

“I’m expecting a dovish dot plot, but the statement will be consistent,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “The fight against inflation has not been won and the Fed will continue to move as necessary.”

In a busy week for central banks elsewhere, the European Central Bank and the Bank of England are also due to issue interest rate decisions on Thursday.

The Dow Jones Industrial Average rose 139.36 points, or 0.38%, to 36,544.29, the S&P 500 gained 4.92 points, or 0.11%, to 4,627.36 and the Nasdaq Composite added 19.96 points, or 0.14%, to 14,452.45.

European shares reversed course following the CPI report, after Germany’s DAX and France’s CAC-40 touched record highs

The pan-European STOXX 600 index lost 0.21% and MSCI’s gauge of stocks across the globe gained 0.14%.

Emerging market stocks rose 0.31%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.45% higher, while Japan’s Nikkei rose 0.16%.

Treasury yields pared losses after the core CPI number landed largely in line with expectations.

Benchmark 10-year notes last rose 4/32 in price to yield 4.2236%, from 4.239% late on Friday.

The 30-year bond last fell 1/32 in price to yield 4.332%, from 4.33% late on Friday.

The dollar gained back some of its losses against a basket of world currencies in the wake of the inflation data.

The dollar index fell 0.2%, with the euro up 0.25% to $1.0788.

The Japanese yen strengthened 0.47% versus the greenback at 145.50 per dollar, while sterling was last trading at $1.2548, down 0.04% on the day.

Oil prices slid, turning back from earlier gains as concerns about excess supply and slowing demand overshadowed supply risks due to escalating tensions in the Middle East.

U.S. crude fell 3.95% to $68.50 per barrel and Brent was last at $73.20, down 3.72% on the day.

Gold lost some momentum following the CPI report, turning negative.

Spot gold dropped 0.1% to $1,980.39 an ounce.

(Reporting by Stephen Culp Additional reporting by Amanda Cooper in LondonEditing by Mark Potter and David Evans)