Stocks Grappling With December Inflation Report

U.S. stocks are choppy as the markets wrestle with the implications of a highly anticipated December consumer price inflation report that showed the headline figure declined but the core rate rose, both in line with expectations. Treasury yields are losing ground, along with the U.S. dollar. Crude oil prices are rising and gold is extending a recent run. Employment figures were also in focus, with jobless claims dipping slightly and coming in better than expected. American Airlines boosted its Q4 guidance, though KB Home missed quarterly expectations. Asia finished mostly higher, and Europe is continuing its strong start to 2023 with the U.S. inflation data in focus.

At 10:48 a.m. ET, the Dow Jones Industrial Average is up 0.2%, the S&P 500 Index is dipping 0.1%, and the Nasdaq Composite is declining 0.3%. WTI crude oil is increasing $1.07 to $78.48 per barrel, and Brent crude oil is advancing $1.10 at $83.77 per barrel. The gold spot price is trading $13.90 higher to $1,892.80 per ounce, and the Dollar Index is falling 0.5% to 102.65.

American Airlines Group Inc. (AAL $16) boosted its Q4 earnings-per-share (EPS) guidance and also raised its revenue outlook. The air carrier noted that total revenue per available seat mile is expected to be up about 24% compared to the same period in 2019 and higher than its previous guidance, and that its debt reduction initiative is well ahead of its goals. Shares are trading solidly higher.

KB Home (KBH $35) reported Q4 EPS of $2.47, below the $2.86 FactSet estimate, with revenues rising 16.0% year-over-year (y/y) to $1.9 billion, slightly south of the Street's forecast of $2.0 billion. The homebuilder said while favorable demographics and a prolonged undersupply of homes gives it confidence in the housing market's long-term outlook, current conditions remain challenging. KBH added that higher mortgage rates and persistent inflation, together with an uncertain economy, have made homebuyers more cautious since the middle of last year. Shares are falling.

The equity markets are digesting today's inflation and employment figures and awaiting tomorrow's start of Q4 earnings season, while grappling with the ultimate impact of aggressive Fed actions to try to combat rising prices. Last week’s December job report added to the uncertainty regarding the Fed’s monetary policy decisions. Schwab’s Chief Investment Strategist Liz Ann Sonders discusses in her latest article, Hurts So Good: Jobs Picture Stays Mixed, how there was something for everyone—even those supportive of an economic soft landing—in December's jobs report, but recessionary signals have not subsided.