S&P 500 Closes At New Record Despite Inflation Hitting Nearly 40-Year-High

Topline

The stock market moved higher on Friday—extending this week’s rally—despite consumer prices surging 6.8% last month, the highest inflation reading in nearly 40 years, according to data released by the Labor Department.

Markets moved higher even after more bad inflation data.

Richard Drew/ASSOCIATED PRESS

Key Facts

The Dow Jones Industrial Average rose 0.6%, over 200 points, while the S&P 500 gained nearly 1% and the Nasdaq Composite 0.7%.

While markets took a hit after the first case of omicron was reported in the United States last week, stocks have recently bounced back as investors grow less fearful about the Covid omicron variant—with the S&P 500 hitting a new record high on Friday.

Even a bad inflation reading on Friday morning wasn’t enough to spook investors: Consumer prices rose 6.8% in the 12 months ending in November, according to Labor Department data, which shows inflation at a nearly 40-year high.

Some investors who expected an even higher inflation reading were relieved by the news and sent stocks up, while others remain optimistic about the ongoing economic recovery boosted by a strong labor market recovery.

Shares of tech giant Oracle jumped over 15%, a day after beating quarterly earnings estimates, while shares of at-home fitness company Peloton added to the previous day’s losses, falling over 5% on Friday.

Vaccine maker Moderna’s stock, meanwhile, fell nearly 6% as investors await more data and updates on the efficacy of the company’s Covid treatments against the omicron variant.

Big Number: $15.1 Billion

That’s how much Oracle cofounder Larry Ellison’s net worth jumped on Friday, to $135.7 billion, according to Forbes’ estimates. He is now the seventh richest person in the world.

Key Background:

After the emergence of the omicron variant led to a sell-off last week, stocks are now on pace for a solid weekly rebound. All three major indexes have risen by nearly 4% this week as investor concerns about the new variant abate amid news that vaccines are effective against it.

Crucial Quote:

“The inflation print from this morning will reinforce the Fed’s resolve to accelerate tapering,” predicts Anu Gaggar, global investment strategist for Commonwealth Financial Network. “With the strength in the economic recovery, it is time to take the crutches away,” he says, adding, “supply and labor shortages will keep aggregate prices elevated for longer, keeping inflation higher than the Fed target for a while.”

What To Watch For:

While December has historically been a great month for the stock market, the new omicron variant is causing “major volatility” and complicating the inflation outlook, says Ryan Detrick, chief market strategist for LPL Financial. Despite the myriad of challenges facing markets in 2022, he remains “optimistic” that stocks will finish the year on a solid note.