Stocks Climbing Sharply Following Consumer Price Inflation Data

U.S. stocks are soaring in pre-market trading amid a softer-than-expected November consumer price inflation report. The report seems to be soothing concerns regarding how aggressive the Fed will remain with its rate hikes. This comes ahead of tomorrow’s highly anticipated Fed monetary policy meeting, as the markets are expecting a 50-basis point increase to the target fed funds rate. In other economic news, the NFIB Small Business Optimism Index unexpectedly rose. Equity news is light, as Oracle beat earnings estimates despite the significant impact of the strengthening U.S. dollar, while Raytheon Technologies authorized a $6 billion share repurchase program. Treasury yields are plummeting following the inflation data, and the U.S. dollar is falling, while crude oil and gold prices are rising. European stocks are climbing higher as investors digest the CPI report and await central bank actions that will be announced later this week. Asian stocks were mixed as markets in the region waited for today’s key inflation data.

As of 8:50 a.m. ET, the March S&P 500 Index future is 128 points above fair value, the DJIA future is 688 points north of fair value, and the Nasdaq Index future is 489 points over fair value. WTI crude oil is rising $1.53 to $74.70 per barrel, and Brent crude oil is increasing $1.70 to $79.69 per barrel. The gold spot price is gaining $30.00 to $1,822.30 per ounce. Elsewhere, the Dollar Index is falling 1.2% to 103.94.

Oracle Corporation (ORCL $81) reported adjusted fiscal Q2 earnings-per-share (EPS) of $1.21, besting Factset’s $1.17 estimate, as revenues rose 25% year-over-year (y/y) in constant currency to $12.28 billion, versus the expected $11.96 billion. The multinational computer technology company discussed how the strengthening U.S. dollar had a significant impact on results, and if not for the foreign exchange impact, EPS would have been $0.09 higher. ORCL also noted how each of its strategic businesses delivered solid revenue growth, and how the growth “was powered by our infrastructure and applications cloud businesses that grew 59% and 45% respectively, in constant currency.”

In other equity news, Raytheon Technologies (RTX $100) authorized a $6 billion share repurchase program.

The equity markets have been choppy after last week’s losses snapped a two-week rally, with investors wrestling with the impact of aggressive monetary policy tightening from the Fed and how long and at what pace the Central Bank will continue to raise rates. Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her article, U.S. Outlook: How Many More Times, Fed?, how Powell, among other Fed officials, has seemingly shifted his attention from the rear-view mirror to the windshield. She points out how inflation is a lagging indicator, but the impact of monetary policy changes is in the future.

Inflation data came in softer-than-expected, small business optimism unexpectedly rose

The Consumer Price Index (CPI) (chart) rose 0.1% month-over-month (m/m) in November, compared to the Bloomberg consensus estimate calling for a 0.3% gain, and versus October's unrevised 0.4% increase. The core rate, which strips out food and energy, gained 0.2% m/m, below expectations calling for it to match October’s 0.3% rise. Compared to last year, prices were 7.1% higher for the headline rate, below estimates calling for the rate to decline to a 7.3% increase from the prior month's unrevised 7.7% rise. The core rate was up 6.0% y/y, south of projections of a 6.1% gain, and versus September's unadjusted 6.3% rise.