CPI numbers improved more than expected on Thursday, sparking a robust stock market rally that saw the S&P 500 rise almost 6% for the week. The year-over-year increase in CPI was 7.7%, which fell short of the 7.9% forecast and matched the 8.2% pace from September. Rents are also expected to rise at a slower pace in the months ahead, according to Spirits. After a 0.8% increase in September, owners’ comparable rent increased by 0.6% for the month. The Fed’s higher short-term interest rates are thought to be having an effect, which is most noticeable in the housing sector – stemming optimism.
While inflation has decreased from its highest point, there is still a lot of work to do. Rent is a “sticky” element of inflation and typically rises at a slower pace than the rest of the price. Despite positive news on many fronts, the Atlanta Fed’s year-over-year measure of sticky inflation climbed to 6.5%. “A notable shift has occurred in the market, with investors increasingly risk-on across asset classes,” Mark Hackett, Nationwide’s Chief of Investment Research stated. “Technical indicators have improved dramatically, with investor sentiment, momentum, breadth, and risk factors all showing notable improvement.”
What’s to come with the rise?
Moreover, owing to the repair of the economy following covid, most inflation components linked to supply chain difficulties improved the stock market. Airfares were the lone reading above the headline rate, due in part to last year’s lower prices. Leisure air travel has also recovered to its pre-crisis level. Used car costs, for example, have started to drop, which should help car rental costs as well.
Futures on the Dow Jones Industrial Average dropped by 84 points – 0.25%. Nasdaq 100 futures fell 0.55%, while S&P 500 futures dropped 0.32%. The blue-chip Dow climbed 4.2% last week, its best week since March, while the tech-heavy Nasdaq Composite advanced 8.1%.
Over the weekend, investors weighed news from the political front. According to NBC News, Democrats will retain control of the Senate in the 2022 midterm elections. The party will hold at least 50 seats.
Concurrently, with a strong emphasis on retail, the third-quarter earnings season will intensify. Before the bell on Monday, Tyson Foods will release its results. Walmart, Home Depot, Target, Lowe’s, Macy’s, and Kohl’s are all set to report numbers this week.