- The U.S. Consumer Price Index (CPI) rose at a 2.7% annual rate in the most recent report, below the expected 3.1%.
- The report was delayed and lacks October data due to the U.S. government shutdown.
- The Nasdaq 100 led stock gains, helped by strong earnings from Micron, while the S&P 500 and Dow Jones also rose.
- Experts caution that the inflation reading may not fully indicate a downward trend due to missing data points.
- The Federal Reserve’s recent rate cut contributed to higher stock prices and signals ongoing support for the economy.
The U.S. stock market saw gains Thursday as the latest inflation data was released. The Consumer Price Index (CPI), which measures changes in the cost of goods and services paid by consumers, increased at a 2.7% annualized rate last month. This figure was lower than analysts’ expectations of 3.1%, according to a delayed report from the Bureau of Labor Statistics (BLS). The report covers a period that included the U.S. government shutdown and was published over one week later than usual.
The update was incomplete because data for October could not be collected due to the shutdown. The BLS used some alternative nonsurvey data sources to estimate the latest inflation index but stated it was unable to retroactively obtain the missing October information. This led to some caution among economists about interpreting the results as a clear sign of declining inflation.
The stock markets responded positively. The Nasdaq 100 index, which is heavily weighted in technology companies, increased by 1.4%. This rise was supported by a strong earnings announcement from Micron, whose shares jumped 10%. The S&P 500 benchmark rose around 0.8%, while the Dow Jones Industrial Average gained approximately 0.2%. However, some experts advised careful consideration of the gains given the unusual nature of the inflation data.
The Federal Reserve’s recent interest rate cut also helped push stocks higher. The CPI report suggests a less aggressive inflation environment, which might reinforce the Fed’s focus on sustaining employment. Tom Lee, head of research at Fundstrat, stated, “A tame CPI will reinforce that the Fed is focused on protecting the employment market. And that means a Fed ‘put’ is now in place for the economy. In other words, if the Fed is concerned about downside risks to the economy, the Fed ‘put’ comes into play and this would be for stocks to rise.”
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