On Friday, Wall Street advanced and the S&P 500 reached an all-time closing high, with market participants taking in the inflation reading that appeared to be in accordance with expectations and also saw the largest increase in consumer prices annually in four decades. There was an increase in all three of the major stock indexes in the United States, with most of the heavy lifting falling to tech shares. All indexes ended this Friday’s session higher than the last one and the S&P 500 saw its biggest percentage advance in a week since February 5th. Early in the week, there was a broad rally because of declining fears associated with the Omicron variant of the coronavirus.
A Labor Department report showed there was a 6.8% surge in consumer prices in the previous month, which is the highest reading to have been seen in the last 39 years. Market analysts said that the reaction today indicates markets have chosen to discount the CPI readings. It is probable that they are looking towards the future. The ongoing supply challenges have led to persistent inflation, which indicates that the US Federal Reserve may decide to tighten its accommodating monetary policy a lot sooner than expected.
According to experts, the inflation appears to be a result of supply-chain issues, but these seem to be easing and they could soon become moderate, which would help in slowing down inflation. Economists believe the central bank will increase the interest rates in the third quarter of the coming year from zero to 0.25% to 0.50%. There is another hike expected in the fourth quarter as well. The next monetary policy meeting of the Fed is scheduled for next week and market participants will scrutinize for any clues from the two-day meeting about increases in rate and the pace of their bone repurchasing program.
Market experts said that the Fed would tighten soon and markets were more comfortable with this prospect because it would control the level of inflation. There was a 0.6% increase in the Dow Jones Industrial Average, as it increased by 216.3 points. The S&P 500 advanced by 0.95%, which marked a gain of 44.7 points. The Nasdaq Composite increased by 0.73%, or by 113.23 points. The S&P 500 is made up of 11 major sectors and every single one of them was in the green, with the biggest percentage jumps seen in consumer staples and technology.
There was also a 15.6% jump in shares of Oracle Corp., after it forecast its outlook for the third quarter to be an upbeat one. There was also an 8.3% gain in Broadcom Inc. after the announcement of a share buyback program by the chipmaker worth $10 billion. The CEO of Tesla Inc., Elon Musk tweeted that he was thinking of becoming an influencer and quitting his job. There was a 1.3% gain in the stock of the car manufacturer. There were 38 new highs on the S&P 500 in the last 52 weeks and only one low.