Wall Street closes higher after CPI data
US stock indexes have risen after data showed that while US inflation was at its highest in decades, it largely met economists' expectations.
That cooled some fears that the Federal Reserve would have to pull back support even more forcibly than already expected.
Ten out of the 11 major S&P sectors finished higher on Wednesday after the news with the S&P 500 and the Nasdaq outperforming the Dow as growth stocks outperformed value.
Data from the Labor Department showed the consumer price index increased 0.5 per cent last month after rising 0.8 per cent in November, while in the 12 months through December, the CPI surged seven per cent to its highest year-on-year rise in nearly four decades.
Economists polled by Reuters had forecast a CPI gain of 0.4 per cent for December and seven per cent on a year-on-year basis.
"Investors were bracing for even hotter in inflation than what we actually saw. As bad as the number is and as much inflationary pressure that's in the economy there was a little relief in that," said Anthony Saglimbene, Ameriprise Financial's global market strategist.
"Today's inflation report validates the Fed trajectory and means they don't have to be any more aggressive than is already priced in."
The central bank's plan for easing accommodation to fight inflation includes raising interest rates, which analysts expect to start as soon as March, as well as tapering its bond buying program and reducing its asset holdings.
The Dow Jones Industrial Average rose 38.3 points, or 0.11 per cent, to 36,290.32, the S&P 500 gained 13.28 points, or 0.28 per cent, to 4,726.35 and the Nasdaq Composite added 34.94 points, or 0.23 per cent, to 15,188.39.
The S&P's top sector gainers of the day were materials, up almost one per cent, consumer discretionary, up 0.6 per cent and technology which rose 0.4 per cent.
Growth and technology stocks have been staging a comeback this week, with investors watching a variety of metrics to decide whether to buy the rally or brace for more declines.
The Dow's biggest drag for the day was Goldman Sachs, which fell three per cent and Morgan Stanley fell 2.7 per cent on the day as their smaller rival Jefferies fell nine per cent after it missed quarterly earnings expectations.
The biggest boosts to the S&P on the day were Tesla up 3.9 per cent ahead of Microsoft Google parent Alphabet, which both rose more than one per cent.
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